April 10, 2006
Law Firms Can Stop the Client Expense Cash Drain
Under the heading BIG IDEAS, the March/April 2006 issue of Legal Management reports on an innovative approach for managing client expenses advanced by the firm. Why bother? AmLaw 100 firms alone advance more than $4.5 billion in interest-fee loans when prepaying their clients’ hard disbursement cost. Any law firm funds tied up in uncollected funds comes out of the pockets of partners.
The new approach involves the firm’s use of a Dedicated Hard Disbursement Line of Credit (DLOC). Checks for client expenses are paid from the DLOC. The hard disbursement amounts and interest and audit fees are automatically added to the client’s next invoices by software that integrates with the firm’s accounting system. The firm simply passes on the carrying cost to their clients without added markups. Legal Management reports that the DLOC complies with the
For more about DLOC, check out Disbursement Management Associates and their sister organization PTFM.
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Filed under Cash Flow Issues by Tom Collins