Firms are facing an impending cashflow crisis, with the profession being among the first to pay suppliers and the last to collect payments from clients, according to research for an insolvency practitioner. 

In its Red Flag Alert report, consultancy Begbies Traynor found that the average late payments to firms' suppliers is 12 days – three days less than the national average.

Mark Halstead, partner at Begbies Traynor's rescue and recovery specialist Red Flag Alert, said this is a worrying contrast to the large amounts of unbilled work many firms are running.

Halstead said small firms must pay close attention to cashflow management to remain solvent next year. ‘Firms are coming to the end of the tax year and face the added cost of professional indemnity insurance,’ he said. ‘In January, February and March solicitors need to be looking closely at their cashflow in the bank.’

Joanne Wright, head of professional services at Begbies Traynor in Manchester, said: ‘This is yet another negative factor impacting on legal practices. Firms really are being hit by problems from every direction and it is difficult to see light at the end of the tunnel for a large number.’

Earlier this year research from accountancy firm Crowe Clark Whitehill found 40% of smaller firms are running in excess of 150 lock-up days.