As we all breath sigh of relief, and acknowledge that the world has not in fact spun off its axis, there is an uneasy consensus forming that, while we may have jumped out of the pandemic frying pan, we have landed in the fire of a global recession.
For law firms, one of the more pressing issues arising out of that recission looms in the new year.
For a number of reasons (explored in detail here https://calicolegalgroup.co.uk/way-to-recovery/) many firms are storing up a cash crunch for the first quarter of next year. Largely because most of the government support schemes will have come to an end and/or payments that were deferred (VAT and tax) will have all come home to roost.
To emphasises the point, this survey finds that 68% of firms have deferred their VAT bills until the first quarter of next year, and 31% have sought time to pay their July Tax bills, which will also fall due then (along with the “normal” January payments).
That’s a lot of cash “out the door” in the first quarter of 2021!
So, the question is – will you generate enough cash in the next 6 months to pay all the bills falling due in the first quarter of next year?
We want to help as much as we can.
First, we can help with forecasting. All firms (and I mean ALL firms) need cashflow forecasts. I was the Managing Partner of a law firm during the last recession and, in my (not an accountant’s) opinion the cashflow forecast is one of the most critical management tool a firm has. While profit and loss accounts are important, and balance sheets are interesting in a somewhat academic way (!) …. your cashflow forecast is the thing that tells you whether you can pay the salary bill at the end of the month.
The problem is, it’s a continually moving target and, to be truly useful, needs to be constantly updated. In the survey referenced above, 54% of firms plan to review their forecasts weekly, and 28% will review them daily!
You can’t ignore your cashflow forecast!
However, the forecast only tells you when you’ll run out of cash. It doesn’t generate cash! To do that you need to fee your WIP and collect your fees. But we can help with that too.
We have recently released an update to our web Portal that automates your credit control function.
The most important part of a credit control process is consistency. Every bill needs to be chased at regular intervals, with increasing levels of “severity” until paid. Each one. Every month. No exceptions.
However, it’s a labour intensive, administrative task that often falls off the edge of a busy desks. The Cashroom’s credit control service is designed to automate you credit control process, allowing you to get back to your clients. It’s a simple, add on module to our Web Portal, that we set up to suit you, and your firm. Find out more about it here.
“We’ve been using the Cashroom’s Credit Control module for 4 months now, and it’s wonderful. As we come out of lockdown, cashflow will be critical, and the starting point is credit control. The Cashroom’s module automates the process, which makes keeping on top of chasing payments simple and efficient. It’s allowed our staff to focus on delivering our service as opposed to chasing for payments. Fundamentally, it has automated the process of cash recovery and my company relies on it.”
Billy Smith, Complete Clarity Solicitors
If you want to find out more about the service contact
E: David.Calder@thecashroom.co.uk T: 07876 236578
Director of Business Development (based in England) E: Alex.Holt@thecashroom.co.uk
T: 07817 420 466