Law firms wait more than four months to get paid

Mark Turner, 11 September 2023

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Law firms are currently grappling with a concerning trend - the prolonging wait for payment. The average time the UK’s Top 100 law firms wait to achieve payment is now longer than four months. This is in stark contrast to businesses in other sectors that experience a significantly shorter waiting period, averaging just 56 days.

Firms in the bottom half of the UK’s Top 100 law firms list are facing longer waits than the Top 50 for payment.  Specifically, the bottom half faces an average wait of 133 days for payment, which is 16% longer than the Top 50 law firms that wait 114 days.

What’s driving the challenge?

The problem of poor cashflow for law firms appears to be getting worse as last year’s average delay is two days worse than that of 122 days in the previous 12 months. Unfortunately, the situation is unlikely to improve as law firms are not taking sufficient action to address the problem of slow payment by clients. Most lawyers will admit they are poor at issuing invoices to their clients.

The delicate balance between maintaining strong client relationships and ensuring a healthy cashflow has posed a dilemma for lawyers. The fear of damaging client relationships often leads to hesitancy in pursuing overdue bills, which inadvertently exacerbates the problem.

Having weak cashflow like that can substantially increase the risk that a law firm will get into financial distress, especially in a weak economy. If economic conditions deteriorate further, clients may adopt even more cautious stances, further prolonging payments.

Many of the law firms with the longest delays in payment tend to be those that specialise in litigation, probate and property. Payment for this type of work is often held until the completion of the project, which can often take months or even years to conclude.

The role of a credit control function

Law firms can speed up the time it takes to receive payment by investing in their credit control functions. The role of a credit control function is to ensure that clients pay their bills on time. Across the legal sector, the smaller the law firm, the less likely they’ll have a credit control function.

Firms that hire specialist staff to chase unpaid invoices or invest in debt management software are likely to see a rapid improvement in their cashflow. Comparatively, law firms with ineffective credit controls in place will have reduced working capital and may find their growth plans scuppered by delays in payment.

How can we help

Law firms should be very worried about how long it’s taking to receive payment. Not only could this hinder growth but in extreme cases it could even cause solvency problems.

There are times in the year in which it’s particularly important to have significant cash reserves. This includes accounts year ends when credit scores are taken and when tax payments are due.

While these events are in the calendar, firms often find themselves scrambling to call in debts to make up sufficient working capital in the lead up to such times. To avoid this stress, firms need to be more proactive to ensure debts are called in throughout the year.

If you’re looking for an advisor to guide you through these challenges, please reach out to our Head of Professional Services, Mark Turner (