Cash remains king for firms keeping ahead of the Covid-19 curve  

Kate Arnott, head of professional services, partner at MHA MacIntyre Hudson, outlines the positive results of a 2020 law firm survey and pinpoints the reasons why firms still need to work on improving cashflow.

In May 2020, and again in December 2020, the MHA Professional Practices team undertook a survey on the impact of Covid-19 on law firms, focusing on fee income, cashflow, business strategy and working practices.

Our key findings reflect positivity in the market, tempered with caution around a few key trends.

Key findings:   

• In May 2020, 39% of firms surveyed thought Covid-19 would have a ‘Major’ or ‘Critical’ impact on their fee income, compared to 9% in December 2020. However, while 91% of firms have made a profit since March 2020, 66% have seen a decrease in fee income of up to 20%. 
• 58% of respondents have adapted their strategic approach by revising their service lines, office locations, reducing expenditure and/or reducing staff numbers. 
• 53% of firms made redundancies between March and December 2020, but 73% of respondents recruited new members of staff in the same period. Most redundancies affected business services staff and non-profit areas of businesses.  
• 87% of firms utilised the Coronavirus Job Retention Scheme.  
• 77% of firms now expect their employees to spend three days or fewer in the office and 63% saw an increase in productivity, despite the increase in remote working.  
• 35% of respondents reported “property” as their highest-billing service line, while 24% found it to be one of the worst. The second highest, at 22%, was “private client and probate.” 
• 62% of firms recorded an increase in work-in-progress of up to 15%, but some of the most notable issues highlighted by respondents included delayed billing due to work pressures and remote working, with other external factors, such as court closures and a slower turnaround of probate applications and property searches, also playing a part. 

What does it all mean? 

These results demonstrate that legal firms across the UK have been able to adapt their commercial operations in the second half of 2020 and overcome some of the challenges of Covid-19. The wildly pessimistic expectations many of us had at the beginning of the first lockdown have thankfully not come to pass, and profits and legal fees have now stabilised and even increased for many firms. 

Looking ahead, 2021 offers firms an opportunity to continue to reorganise, streamline and go forward as a leaner, fitter business. Working from home has demonstrated to even the most traditional of firms that they can operate effectively via remote working and, with employees keen to continue working remotely for part of their working week, the onus will be on employers to embrace this new way of working in order to support and retain staff once restrictions are lifted in the months ahead. 

While the results of the survey are promising, we should not lose sight that cash remains king. Debts due from clients have disappointingly increased and it’s imperative that firms do not lose the benefit of the improvements in hours logged, expenses reduced and higher profits by not collecting their unpaid bills quicker. 

The full results of our survey can be found here: https://mha-uk.co.uk/insight/knowledge/legal-sector-survey-results/