John Clarke, Head of Professions at Wesleyan Bank, talks financial planning (sponsored content)
So many law firms have spent the last 18 months fighting fires that pausing to plan for post-pandemic growth has become an afterthought for some. But those that have weathered the storm have many reasons to be optimistic about the future. This article highlights how rigorous financial planning is vital to enabling firms to better deal with uncertainty ahead and take advantage of emerging opportunities.
The Law Society’s Financial Benchmarking survey 2021 report highlighted that over three-quarters of law firms have turned to the various Government support schemes to protect their cash positions at the outset of the pandemic. This includes the 83% that chose to defer their VAT liability from March to June 2020 and the 15% that agreed a time-to-pay arrangement with HMRC on PAYE / National Insurance contributions due on monthly salaries.
For some firms, particularly the larger ones, the estimates of the financial impact was overly pessimistic. They were able to ride the pandemic as clients continued to need advice and support during the pandemic.
Many law firms as in other sectors, have been able to return furlough payments, Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back loan payments, as well as making up the salary cuts that were initially made at the beginning of the pandemic.
Pay as you Grow
Earlier this year the government felt that firms needed more flexibility and introduced “Pay as You Grow” so as to give more time to repayment obligations and allow more focus to be on generating revenue and getting business growth back.
It meant there are three options which can be used individually, or in combination, which won’t affect your credit rating:
Extending your loan term from six years to 10, at the same fixed interest rate of 2.5%
One six-month repayment holiday
Reduce payments for six months by paying interest only (available up to three times during the term of your loan).
Using “Pay as You Grow” can ease financial pressures and allow you to form a clear view of the financial standing of the business and understand what is needed for financial security.
To strengthen your cash position, it’s essential to put a financial plan together which looks at the three, six and 12 months’ ahead considering:
• Has the business and fee income has recovered enough to give the opportunity bring any one still on full or partial furlough back?
• Have business’ needs changed and if so what are those requirements?
• Are the changes in working practices sustainable?
• How do you manage staff and financial needs with business growth opportunities?
• What is the expected expenditure to cover staff and office cost as well as fixed liabilities such as PII, tax and VAT
• Is any investment needed in new technology to help efficiency and compliance or is there a need to refurbish the premises or even move to meet the current business model.
Create a business plan which will help you retain greater control of the finances as doing this will help you understand where the firm stands and what opportunities exist.
As the challenges of the last 18 months start to recede, there is opportunity to assess where the business stands and take the key decisions to put you in a firmer financial position which can be the catalyst for growth.
Did you know that Wesleyan Bank have been the chosen provider for Practising Certificate and SRA fees funding for the last sixteen years? You can get an instant quote and apply online in minutes to spread the cost of your fees over 10 months.
Your fees are then paid directly to the SRA on your behalf.
Find out more about PC funding: www.lawsociety.org.uk/wesleyan-pc-fee
This is a financial promotion by Wesleyan Bank.
John Clarke, Head of Professions Wesleyan Bank