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The burden of expenses

It is at best misleading and at worst dangerous to suggest gross fees show how successful a firm is, says Martyn Caplan

29 April 2014

In the last two years, a record number of over 500 firms have closed and the projections for the remainder of 2014 look grim. While small and medium sized firms are undoubtedly being pressurised by the insurance industry, financial constraints are still the major factor causing this on-going catastrophe.

Since 2008, the attitude of the banks has radically changed. Monthly accounts are often now requested and, if after the months, the book debts have not been collected or the work in progress has not been billed, the banks may refuse to allow drawings and or salaries to be paid if the overdraft is at its limit.

Unfortunately, many senior partners continue to regard their law firm as a personal fiefdom rather than as a business that practises law. While attention to the gross fee turnover is important for establishing the firm's future growth potential, it is the expenses which often decide its fate.

Historically, law firms have papered over the crack...

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