In the intricate world of legal services, where precision and efficiency are paramount, a growing concern threatens the financial stability of many UK law firms. New figures suggest that an alarming trend in delayed payments is putting firms in a precarious position, with potentially dire consequences if the issue remains unaddressed.
Analysis conducted by chartered accountants Lubbock Fine has shed light on a troubling reality: the average lock-up period – the time it takes for firms to convert work into cash – at the UK’s top 100 firms has extended to a staggering 124 days. While this represents only a slight increase from the previous year, it’s worth noting that high-profile firms have reported lock-up periods of around 200 days, a significantly concerning statistic.
One industry that stands out for lagging behind others in securing timely payments is the legal sector itself. Legal businesses are grappling with a notable delay in collecting funds from clients, and this issue could lead to severe cash flow problems, especially when outstanding debts are due around the same time as tax obligations or insurance premiums.
Mark Turner, head of professional services at Lubbock Fine, suggests that a key factor in this dilemma is the reluctance of law firms to actively tackle the problem of slow client payments. He points out that many lawyers may hesitate to aggressively pursue outstanding invoices, fearing potential damage to client relationships. Turner underscores the fact that a lack of proper cash flow management can significantly heighten the risk of financial distress for law firms, particularly in an economic downturn.
As the economic landscape remains uncertain, there is a legitimate concern that clients might become even more cautious about holding onto their funds, leading to further delays in payments to law firms. This potential worsening of the economic situation could exacerbate an already pressing issue, leaving law firms in a vulnerable position.
A deeper look into the data reveals that smaller firms within the top 100 are often subjected to longer waiting periods compared to their larger counterparts. Among the legal specialties, litigation, probate, and property-focused firms appear to be facing the most significant challenges in reducing lock-up days. This highlights the need for a targeted approach to address the issue within each legal niche.
Turner stresses that law firms should be deeply concerned about the extended time it takes to receive payment. He warns that this situation not only hampers growth prospects but, in the most severe cases, could even lead to solvency problems. The figures, recorded as of June 30, highlight a troubling trend, and subsequent financial results reported by firms have only served to reinforce the increasing wait times for debt collection.
One notable example is the listed firm DWF, which recently reported a concerning 9% increase in gross lock-up days to 196 in the fiscal year 2022/23. Acknowledging this issue, the firm’s management admitted that their target of 170 days needed reevaluation. DWF’s Group CEO, Sir Nigel Knowles, commented on the ongoing struggle, noting that the firm is putting in significant effort to ensure that lock-up periods remain within reasonable bounds. Clients, he emphasised, are understandably holding onto their funds for more extended periods.
Verify 365 Payment Solution – ePay 365
In this landscape of delayed payments, innovative digital solutions have emerged as potential game-changers. Among these solutions are ePay365 and Verify365, which are revolutionising the way law firms manage payments and client interactions.
“Law firms need tools that expedite their operations without compromising on security or convenience. ePay365 has been engineered to address this precise need by providing a fast and intuitive payment portal. By automating and simplifying the payment process, we aim to empower law firms to focus on delivering exceptional legal services while ensuring their financial health.” explains Rudi Kesic, CEO of Verify 365.
ePay 365 presents an intuitive, user-friendly interface that makes settling invoices a breeze. Its user-centric design emphasizes ease of use, allowing clients to make payments with just a few clicks. This digital payment portal eliminates traditional bottlenecks associated with paper-based payments, reducing the risk of errors and delays.
A Comprehensive Onboarding Solution
Verify 365 serves as an integral part of client onboarding, offering swift identity verification and compliance checks. By streamlining the initial stages of client engagement, Verify 365 sets a solid foundation for efficient payment processing. Its robust security measures ensure that client information is protected, and its seamless integration with ePay 365 optimises the payment journey.
Incorporating digital payment portals like ePay 365 into a law firm’s operations holds the potential to fundamentally transform the way payments are collected. The intuitive nature of these platforms caters to both the law firms and their clients, fostering a seamless experience that ensures timely payments while reinforcing client satisfaction.
In an age where traditional payment practices are being outpaced by technological advancements, law firms that harness the power of platforms like Verify 365 and ePay 365 position themselves at the forefront of innovation. As the legal industry grapples with extended payment collection periods, these digital solutions offer a way forward – a way to streamline operations, expedite payments, and build a foundation for enduring success.
Get in touch for a free demo of Verify 365 ePay 365 solution. Click here to book your demo.