Law firms in the West Midlands could significantly improve their financial performance by unlocking capital that is classed as work in progress, and by fee earners getting more involved with billing and cash collection, according to the interim results of a survey into the performance of the legal sector in the region.
In consequence, the partners of many small and medium-sized firms are losing out on tens of thousands of pounds by having to finance an "investment that is locked up in their clients".
In one instance, a regional firm, with an annual fee income of £5 million, had £580,000 more free cash than a similar- size firm simply because it had debtors at 95 days compared to 122 days at its competitor. The regionwide study, conducted by Strategic Alliance is part of a wider UK project that is comparing regional law firms with national benchmarks.
Richard Brennan, managing director of Strategic Alliance, said the research was important, particularly because it enabled West Midlands' firms to compare their performance with their peers and also, because existing national studies skewed their results towards London-based and top-50 firms.
"Most law firms in Birmingham and the West Midlands cannot compare themselves directly to the national picture because of London domination. Both the environment and the circumstances in which regional firms practice is significantly different to that experienced in the South-east," said Mr Brennan.
Strategic Alliance is particularly keen to concentrate its research on practices that have more than five partners with a strong West Midlands' operational bias.
Initial results show that those firms that have grown have benefited from clear strategic plans that enable them to adapt and develop their business share in response to market trends and developments.
Strategic Alliance is now keen to test some of the preliminary findings by undertaking additional research amongst other regional firms with five or more partners. The survey is anonymous and each participating firm will receive a full copy of the study in advance of publication.