Most attorneys don’t go to law school with the dream of becoming bill collectors. Yet, each year come November and December, courtroom litigators and relationship partners at major firms everywhere transmogrify from zealous advocates into collection agents. Their time is spent not practicing law, but haranguing their own clients to pay up—or pay in advance—before the fiscal year-end.
After countless long hours spent side-by-side—whether in dep prep, a trial war room, or at the deal table—the pressure to hit year-end revenue goals and legal budgets puts attorneys and their clients in conflict as the year winds down. No one, neither attorney nor client, looks forward to this process.
On the law firm side, once polite calls to a client checking in on bills become less and less polite and more and more frequent. At the same time, the discounts offered to clients to pay fees in advance of their due date get higher, and partners watch their realization rates sinking lower.
On the client side, the pressures are no less intense. Legal departments have their own budgets to hit, and ponying up money not yet due to boost outside counsel’s profits-per-partner is not a compelling prospect. After all, legal spend on defense counsel, however necessary, is a drain on the company’s profitability and earnings. Spend on offensive litigation is not much better. Although a year or two of fees may generate a substantial recovery, that one-time inflow of cash doesn’t count for revenues under GAAP, while the cost of litigating is booked as an expense quarter after quarter. Now, with the year-end books about to close, paying counsel for fees not yet due is hardly appealing unless there is a significant discount being offered.
These are areas where legal finance can be immensely helpful.
For law firms targeting year-end collections, Burford can advance fee receivables due next quarter or beyond, allowing immediate revenue recognition. Not only is our cost generally equal to or less than the discounts offered to clients, but our financing is invisible to firms’ clients. When we advance fees, our law firm counterparties collect their bills under their normal payment terms and repay our financing without disrupting their existing client processes.
For the client, our capital can be used to finance counsel on a non-recourse basis, meaning legal spend is taken off the books, improving expenses and the company’s bottom line. Similarly, we can advance an anticipated judgment in offensive litigation, which cash can be used by the client however they like—whether covering other legal costs, funding R&D or anything else.
In short—unless you are the rare sort of lawyer who likes bill collecting, or the even rarer sort of general counsel who loves paying bills—legal finance can help make your year-end easier, less stressful and more profitable.