Firms face payment delays of up to four months

Law firms are now waiting over two working weeks longer for invoices to be paid, leading to cashflow pressures and fears that growth in the sector will be stifled.

In a frustrating development, it now takes 105 days for firms to be paid from the time an invoice is issued - a rise of 12 per cent compared with 2014, where the average was 94 days.

By comparison, the average payment time for UK businesses is just 42 days, according to the European Payment Report.

As a result, smaller firms with a predominantly private client base can struggle to enforce interest payments.

Moreover, such delays hamper firms' ability to invest in growth or headcount to cope with increased business activity, as well as maintaining the pressure on cashflow.

Peter Alderson, managing director of finance provider LDF, said: 'For many firms, cashflow is still an issue, as balance sheets take time to be fully restored to health.

'These findings suggest that the pressure is not easing, potentially leaving some practices vulnerable when major crunch points such as tax due dates and insurance premium renewals come around.'

Alderson warned that there was a real risk that growth in the legal sector could be suppressed just as firms begin to feel more confident about their future prospects.

'Without timely payments coming in, firms are likely to struggle to plan for business investment to enable them to increase capacity, such as taking on extra office space for more staff, expanding into new areas, or upgrading critical infrastructure such as IT systems.'

He added: 'This can be very frustrating for otherwise very successful practices which want to take advantage of growth opportunities but are concerned about committing to upfront capital expenditure against a backdrop of uncertainty over the regularity of income flow.'

John van der Luit-Drummond is deputy editor for Solicitors Journal
john.vanderluit@solicitorsjournal.co.uk | @JvdLD