Cash-flow management is a vital part of running any commercial operation, yet practice owners often don’t give it the attention it deserves.

The delay between the time you have to pay your costs, suppliers, and employees and the time you collect from your clients is the problem, and the solution is cash-flow management. Cash-flow management means delaying outlays of cash as long as possible while encouraging anyone who owes you money to pay it as rapidly as possible.

Note: profit and cash are not the same things. Your practice could be highly profitable, yet have cash-flow problems.

Cash-flow checklist

1. Talk to your accountant or bookkeeper regularly to manage financial issues – daily, if necessary.
2. Micromanage by drilling down into your cash flow on a daily level. Make sure you know what your expected income and cash burn for each day is. This will help to prevent any unexpected liabilities from cropping up.
3. Ensure fee earners are fully up to date with their invoicing.
4. WIP – review your work in progress and see what can be invoiced now and in the short-term. What is required to complete any ongoing files? Is there any reason why you cannot fulfil them? Communicate with your clients.
5. Direct work to areas where you are satisfied that the time spent will generate a recovery from fees within the next three months.
6. Identify what debts can be recovered during this time, and consider offering a discount for early settlement.
7. Consider cutting other non-essential items of expenditure, including reviewing how any firm credit cards are being used. Sort your liabilities/recurring expenses by amount, frequency, and whether they are critical. Where possible, stop any expenditure that is not vital.
8. Identify what payment-holiday options are available and take advantage of these. Remember to cancel your direct debits or standing orders, where appropriate.
9. Speak to your creditors and any bank/lenders/hire purchase and see if they are willing to give you a payment rest or repayment reduction for the next few months.
10. Liaise with your landlord (if applicable) and see if you can have a payment holiday or split the next payment up over a longer period (for example, monthly payments rather than all at once). If you have arrears, then incorporate these into your cash flow and offer to pay something if you can.
11. Review partners’ drawings policy, and consider restricting salary increases at this time. Communication is key – the sooner you engage; the sooner a solution can be found.
12. Finally, make a plan with short, medium, and long-term goals and objectives. Take action and review daily.

Support and resources

Justin Purcell is the Law Society’s practice support executive and can be contacted at j.purcell@lawsociety.ie. Further resources are available in the Business Hub.