For contingency fee law firms, cash flow interruptions present a daunting challenge and a continual balancing act —  one that is especially challenging for managing partners that self-finance case costs and resources.

Taking a Long-term View of Cash-flow Interruptions

When unprecedented events like a pandemic hit, it can clearly separate the leaders with long-term growth visions from short-sighted, unprepared managers.

As high inflation continues to weigh heavily on goods and services, driving up the costs of expert services and case resources, law firms are wrestling with managing economic volatility and uncertainty.

For contingency fee law firm owners who live in a revolving cycle of feast and famine, this can be unnerving. Especially as these increased overhead costs can cut into a law firm’s profit margin, contracting the well of cash it can draw on to invest in growth initiatives.

To combat these cash flow pressures, law firms need to consider playing the long game by planning today for tomorrow. In particular, can take specific, proactive measures now to improve the firm’s financial position.

How to Mitigate Cash Flow Interruptions

There are three simple strategies to mitigate cash flow interruptions and ease the variability of the contingency fee law firm’s cash flow cycle:

1. Having a varied case inventory consisting of a mix of high-volume cases and single event, catastrophic injury can flatten the cycle by injecting more cash more consistently back into the business.
2. Keeping a tight control on overhead and expenses can help a firm stay lean and mean, while being careful to not cut costs so drastically it hampers growth.
3. Borrowing to invest in case expenses, marketing, technology, hiring, etc., is a cost-effective way to quickly increase cash flow.

Watch the 2-minute video above as Bryan Koshers, a contingency fee law firm accounting specialist from Koshers & Company, explains these strategies further.

For more resources about prudent cash flow management, read “How Contingency Fee Law Firms Can Thrive, Not Just Survive” or “How To Recession-Proof Your Law Firm Business“.