Strong financial performance and efficient working capital management go hand in hand for professional services firms. The slower you are to bill, the later you receive payment, which locks in capital and impacts on profitability. While this may appear self-evident, many law firms could greatly improve their approach to receivables management. In essence, this means minimising the delay between doing work and getting paid for it, benefiting both the business as a whole and the profit-sharing partners.
New research by PricewaterhouseCoopers shows that profit retention in order to fund working capital requirements was a growing problem for law firms in 2004. Last year an average of 42% of firms’ total funding requirements was sourced from partners’ current accounts, compared to 34% in 2003.
