Baker Tilly is raising concerns about the level of awareness of the options and implications for law firms - and their partners - who are in serious danger of going out of business because they don’t have sufficient cash to meet their running costs.
The move follows the recent, high-profile collapse of a number of law firms, as well as recent research by the Association of Business Recovery Professionals (R3) which shows that just over 30 per cent of UK law firms are at risk of failing within the next twelve months.
Baker Tilly is working to raise awareness amongst partners, members and directors of law practices of the importance of understanding the financial stability of their business, and perhaps more importantly, the consequences - both professional and personal - when things go wrong.
Baker Tilly is currently carrying out a survey amongst UK law firms to assess awareness and knowledge levels of financial stability within partnerships, LLPs and corporate practices, with a view to getting a UK wide perspective of how widespread the issue is.
Rowan Williams, Baker Tilly's Head of London and South Professional Practices Group, said, 'Many partners assume that, as their practice has come through the recession and profits are stable or improving, they are safe. But if a practice doesn't have sufficient cash to meet its running costs, then there is a real risk of firms failing. I fear that the issue is more widespread within the legal sector than people would imagine.
'I firmly believe that too many partners are unaware of whether there are any serious financial issues within their practice, and don't understand the personal consequences if their business goes under. In my experience, law firms ask for help too late, after things have seriously taken a turn for the worse, which is usually about six months before failure. It’s going to get tougher for law firms, and if they don't identify the red flags early, then the legal sector will indeed face the predicted 'perfect storm' with many becoming insolvent this autumn.’
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