UK: Shy lawyers allowing clients to go months without paying

UK law firms are taking more than four months to get paid and face a ticking timebomb if they cannot get clients to settle bills more quickly, new figures suggest.

Analysis from chartered accountants Lubbock Fine shows that the average lock-up at the UK’s top 100 firms is now 124 days, a small rise from last year. High profile firms have this year reported lock-up of around 200 days. 

Lubbock Fine said that legal businesses lag well behind other sectors for ensuring they get paid and many will face serious cashflow issues if they fail to call in debts before tax bills or insurance premiums are due.

Mark Turner, head of professional services, suggested that law firms were not taking sufficient action to address the problem of slow payment by clients, and some lawyers may be reticent about pursuing outstanding bills and damaging client relationships.

Turner said: ‘Most lawyers will admit they are poor at issuing invoices to their clients. Having weak cashflow like that can substantially increase the risk that a law firm will get into financial distress, especially in a weak economy.'

‘If the economy weakens even further then clients of law firms may be even more careful about sitting on their cash and delaying payments to law firms.’

Firms in the bottom half of the top 100 tended to face longer waits than bigger firms. Those specialising in litigation, probate and property find it the most difficult to bring down lock-up days.

Turner added: 'Law firms should be very worried about how long it’s taking to receive payment. Not only could this hinder growth but in extreme cases it could even cause solvency problems.'

The figures relate to lock-up days as of 30 June, but firms reporting financial results since then have added to the trend of increasing wait times to call in debts.