For any law firm that is involved in practicing and managing the cash flow has become very important. Managing an individual’s cash flow seems like an afterthought for many trial lawyers. Cash flow is considered sporadic as they are only paid when the case is concluded successfully. With many of the cases that take, years to conclude projecting a cash flow could be a tricky task. Many firms normally advance their litigation cost right upfront in exchange of a recovery percentage. During a case, a firm normally invests many attorney hours and thousands of dollars in just a single case. If any firm happens to lose a case, it also loses the time and the cash that was invested. A firm is also not allowed to reduce any money that has been tied up with the case cost. They will also have to fund this money right up front as well as fund it with any after tax dollars required. After this, they do repeat the same cycle and plow any fee from a case that is successful into another group of the cases.
The only missing ingredient is the improvement of cash flow for many law firms; this is something many businesses have made use of for years, called advantage. Many of the law firms have also funded the costs from their pockets ever since they started out and this is because this is how it is always done.
A revolving credit line is known to be the most important aspect in a plaintiff lawyer fight for the purpose of justice. By making use of money borrowed for funding any litigation, expense a firm could also remove any sort of negative tax consequence of having to self-fund. The firm then realizes the income that it is receiving in terms of fees. Any sort of interest that a firm pays could be offset by keeping the money, which was tied up in many cases. One of the biggest advantages now has to no longer make use of tax dollars in order to fund any development expense.
Now we are at a time where many law firms have options more than before especially when it comes to financing a practice of theirs, right from making use of traditional banks as well as finance companies to financial consultants.