Leadership Exchange - August/September 2011 - (Page 42)

COACH’S CORNER Ed Poll, J.D., M.B.A., CMC EdPoll@lawbiz.com 800-837-5880 WHERE WILL THE CASH COME FROM? management. Too many firms operate like small businesses on a cash-in-hand basis, with insufficient reserves to weather a crisis. ger feasible (if it ever was) in today’s tight credit markets. So this answers, and one that appears to be emerging. CAPITAL CALL They typically draw down their capital every year based on tax advice to reduce cash before December 31. However, this leaves them raises the question that often confronts financial administrators: The traditional method of capital infusion for firms is a capital capital improvements and expand the firm. Such thinking is no lonlittle or no reserves to meet emergencies or contingencies or to make what are the best strategies to raise cash? There are four traditional call from their partners. This is not as good a strategy as it used to be. Partners who are themselves financially thin may have to ask partners to make the firm better at its use of capital. CREDIT LINE may need to get a second mortgage, pledge other assets as additional The financial health of any law firm ultimately depends on cash are specialized loan transactions such as an equipment term loan, in which the amount provided to purchase new equipment will normally be no longer than the depreciable life of a law firm’s equipmust demonstrate the strength of their financial controls and business model, and have a high credit score in hand. COLLECTIONS firms to raise capital is to promptly collect the billings due to them. It cannot be emphasized too strongly that the best way for law ment, usually three to five years. To obtain any kind of loan, firms That means firms should not be banks that carry their clients’ expenses, and should not offer discounts on fees that have been agreed agreement is the best way to get paid. This is particularly true when significantly increases the chance of collecting the fee. INVESTORS upon. Stipulating rates and terms of payment in the engagement the bank for help in order to satisfy the capital call, and in return collateral or even get guarantors. Seen in this light, a partnership requirement to contribute more to the firm can be a call to action for the client accepts a budget and understands what to expect, which lawyers by stating that lawyers and non-lawyers shall not share fees, meaning that firms shall have no investors other than the partners. However this has already changed in Australia and England, and is starting to change in the U.S. North Carolina considered a bill to allow 49% non-lawyer ownership in firms, while the District of Cobut not enough perhaps to overcome the desire of large firms to grow of the mandatory (integrated) bar association into state licensing ministrator’s life. lumbia permits non-lawyers to own 25% interest in a law firm. This raises potential client confidentiality and public disclosure concerns, agencies for large firms (just as corporations are licensed now) and voluntary bar associations serving the economic interests of sole and as big as their corporate clients. This issue could cause the breakup small firm practitioners – another potential complication in the adAbout the Author: Edward Poll, J.D., M.B.A., CMC, is currently on a naModel Rule 5.4 prohibits firms from selling equity shares to non- repays at will up to the limit, but usually at least once per year. Banks are much more reluctant than they were before the recession to give credit to any commercial customer. Moreover, credit line terms can fluctuate substantially, however the bank dictates. Banks often set formal credit line amounts, such as three times monthly expenses. The bank also usually prefers that the law firm borrower be out of the line of credit is reviewed regularly by the bank and extended, cut not a strong alternative. BANK LOAN row and repay at will up to the amount of the credit line. However, Law firms do have credit lines on which the firm borrows and debt for at least 30 to 90 days each year. The firm may be able to boror terminated as circumstances warrant. In short, a line of credit is large law firm, three to five for a smaller one. In a revolving line of a term loan, repayable over a period of from two to five years. There A term loan, which can be for as long as seven to ten years for a tional tour to speak to bar associations and law schools, sponsored by Fujitsu ScanSnap and Lexis Hub. Ed’s extensive background in business and law have made him one of the nation’s most sought-after experts in law practice management. Check out Ed’s progress at www.lawbiz.com and contact Ed if you want him to speak to your group. credit, the firm might obtain a designated sum which is converted to 42 Greater Los Angeles Leadership Exchange RENROC S’HCAOC http://www.lawbiz.com

Table of Contents for the Digital Edition of Leadership Exchange - August/September 2011

Leadership Exchange - August/September 2011
Robert Half Legal
Member Connection Campaign
President's Message
Editor’s Message
Region 6 Officers
August Calendar
September Calendar
Save The Dates
September Chapter Meeting Notice
2011 Justice Jog Law Firm Challenge
Human Resources
Certified Document Storage & Destruction
Business Partner/Member Mixer | Justice Jog Kick-Off
Members-In-Transition Welcomes You
GLA ALA Section Reports
American Language Services
Merrill Corporation
New Members & Member Updates
Region 6 Conference
New Member Spotlight
New Member Drive Contest
Information Technology
June Chapter Meeting Recap
New Member Orientation Invite
Community Outreach Program
2011 Justice Jog
First Legal Network
Past-Presidents Evening Seminar Recap
Iron Mountain
Special Counsel
SOS — Succeed Over Stress
Innovative Computing Systems
GLA ALA Essay Contest
Board of Directors
Office Space Available Ad
Esquire Innovations, Inc.
Ricoh Legal/Ikon
Pride of Los Angeles
Technology Tip
CBM Services
Davidson Legal Staffing
Coach’s Corner
ESP Legal Technology
Business Partner Spotlight
ALA Webinars
ALA Legal Marketplace

Leadership Exchange - August/September 2011