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Cash Flow An Important Metric For Law Firms

No matter how much you work, until you convert it to cash it is worthless. The average days in the law firm cash flow cycle (from worked to collected) is 169 (source: 2007 Law Firm Economic Survey from LexisNexis). Shortening your cash flow cycle has a positive impact to liquidity and thus your cash flow cycle should be measured.

There are two metrics that need to be measured: days to bill and days to collect. Determining these numbers on a timekeeper level identifies those timekeepers who are efficient and those who aren't. The opportunity then is to set a standard and work towards compliance by all timekeepers.

What is this standard? It depends on the area of practice. Many insurance companies just won't pay under 60 days of accepted electronic invoice and will only accept these invoices quarterly. In this case, 150 days isn't so bad. Some areas of law (many domestic relations situations come to mind) should, by default, be prepaid. Any work in process should be billed immediately and applied against the prepayments. In these cases a cash flow cycle of 60 days should be cause for concern.

Tools such as Juris from LexisNexis' Active Information can help you track this key performance indicator so that you can improve your liquidity.

We have begun taking submissions for the 2008 Law Firm Economic Survey. If your firm is interested in participating, please contact Brian by clicking here.

Full post as published by More Partner Income on April 10, 2008 (boomark / email).

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How to cash a cashier's check without ID?
I would get some I.D.! Other than that, maybe you can tell the investigator you ...

How can I prove my child support payments are up-to-date?
If she is signing reciepts, then that is proof for any court that he has paid an...

Is a store obligated to provide cash refunds on returned purchase?
Each jurisdiction will have its own rules relating to refunds and exchanges. You...