Ensuring Your Firm Has Adequate Capital

Many law firms struggle with determining and maintaining an adequate level of capital, or available financial resources, to support their daily operations. The nature of law firm billing, collections and expenses can create gaps in cash flow that capital must fill, so it is not surprising that firms increasingly are requiring larger capital contributions from partners. Your firm will find it easier to justify these demands if it has a formal capital plan in place.

Under Pressure

Most firms are facing unprecedented financial pressure from, for example:

• Payable/Receipt Imbalances. Client payments slowed during the recent recession, and, even though the economy is on the upswing, it is still not unusual for clients to drag their feet when settling bills. Outside vendors, on the other hand, always expect prompt payment. Your firm might not even have a chance to invoice a client before vendors demand payment.