A costs specialist has joined with a loans company to advise on helping firms realise income on their work in progress. National firm Justs Costs Solicitors says it will audit firms’ files as part of the approval process for Novitas Loans.
The financier claims it can offer ‘unlimited funding’ to law firms across the country. Money will be advanced through a fixed sum per case and interest then charged on money drawn down.
Mark Hartigan (pictured), client services director at Just Costs, said: ‘Law firms can have considerable sums of money tied up in WIP, significantly constraining the money available for growth.’
The costs firm and Novitas have already worked together on a costs advance scheme started last year, which is now lending more than £1m to law firms every month. This is intended to cover the period between firms applying for and receiving their fees.
Meanwhile, a specialist in helping firms realise the value of their WIP has said many are putting a much higher value on their work than it is actually worth.
David Johnstone, managing director at PI-Solutions, said firms are increasingly placing an unrealistic price on their cases and holding out for more money. The result has been that often the value starts to diminish and a sale is delayed, leaving them insolvent.
‘There’s a tendency to base a guesstimate on the number of files open, then for every file, apply the value they think may be generated on successful completion,’ said Johnstone. ‘So when a solvent firm considers exiting by selling to another firm, there’s an unbridgeable gap in the vendor’s and purchaser’s expectation.’
Johnstone said selling firms need to offer ‘solid historic management information’ based around the costs associated with the practice, professional indemnity insurance, property costs, general overheads and the settlement patterns associated with the quality of work taken on historically.