How can my law firm or chambers turn recent public sector political policy into a business opportunity?
Legal Practices serving the public sector have weathered the financial crisis better than most however this is set to change. With the treasury demanding a reduction in spending on all fronts, the public sector is casting about for opportunities to save money.
The security provided by working in an environment which creates opportunities for long term relationships has already been rocked by a series of tremors in a number of different fields. Reduced private sector investment, scarce bank funding and changes resulting from government initiatives to expand healthcare service provision are all affecting instruction flow. But as risk factors, these have been somewhat offset by a loyal client base continuing to raise instructions, with payment for services considered almost guaranteed.
Although slow payments are a recurring feature, cash flow forecasting and management has been relatively easy in this arena. Methods may need to be re-visited if anticipated budget cuts and staff reduction programmes begin to affect payment patterns. With advice from a specialist cash flow consultancy, risks can be mitigated and new business opportunities explored.
How can I prepare for the change?
It is now critical to ensure Terms and Conditions of trade keep pace with changes in procurement practice. It is essential that credit policy, procedure and training be revised, and the resulting changes communicated within the firm and with clients. Anticipating variance in cash flow now will save a lot of financial pain later. If the management committee knows in advance the financial effect on the business of an increase in 'debtor days', slower or a lower value of instructions, or a combination, expensive and time consuming reactionary initiatives can be averted.
Larger practices, having the benefit of a specialist finance function are best placed to undertake a review of this type. Smaller practices without a specialist resource can only ignore this threat at their peril. Solving a cash flow problem, once it is being experienced, is much more worrying, time consuming and potentially expensive, if increased lending needs to be sought. Whether from the bank or the partners it is rarely quick, easy or cheap to raise funds.
What strategies do I need to consider to mitigate impacts and create opportunities?
In either case, once the potential impact is calculated, decisions can be made on strategy. Action required will include providing a detailed analysis of the sales ledger on a monthly or more frequent basis. Query resolution should be given top priority so that contentious bills are resolved, enabling payment to be made without further delay. Stronger bill-chasing activities might be implemented, or more man-hours dedicated to requesting payment or having meetings with clients who query overdue bills. This list is not exhaustive and other solutions may better fit the needs of individual firms in specific areas. Through analysis, opportunities for new business with longstanding, dormant clients or indeed cross-selling to active clients will become apparent.
Measures to take now should engage support to plan for the changes in transaction volume through-put and to get clear understanding of what the impact on business is likely to be. This enables a wider range of potential solutions to be considered and selected for the right reasons. Your accountant, or business advisor can offer help and guidance, but seeking aid from a specialist consultancy will provide invaluable help to plan for a successful and profitable future, and create no on-going costs. Some even offer hands-on support to work with your team in implementing such changes quickly. This can be extremely beneficial when time is of the essence.
To find out how your organisation may benefit from our bespoke Financial Consultancy and Recruitment service, please see the Contact Us page.
Julie Cave is the Head of the Finance Recruitment and Consultancy at LPA Legal Recruitment (May 2010)