4 Tactics to Stabilize Cash Flow in Plaintiff Law Firms

Plaintiff law firms operate on a bit of a financial tightrope. First, unlike firms that rely on hourly billing, plaintiff lawyers get paid only when they win a case. Contingency fees lead to long payment cycles, as cases can take months or years to resolve. 

In addition, litigation is resource-intensive. Expert witnesses can command hefty fees. Court filing fees, discovery costs from processing and producing evidence, and salaries for skilled legal staff all contribute to a heavy, upfront financial burden. 

Firms also vie to attract top legal talent. Many of the largest US firms continue to maintain starting salaries of $215,000,  adding pressure to raise salaries and bonuses. Retiring partners who take portions of a firm's capital with them further drain cash reserves. 

The steady outflow of resources and a highly unpredictable income stream create a constant cash flow squeeze for plaintiff firms.

Revenue shortages can cripple daily operations as firms struggle to pay their staff or vendors — never mind attracting and retaining top legal talent. Investing in the future becomes a big question mark. The marketing budget is particularly vulnerable. Uncertainty prevents lawyers from taking on new cases. Firms may even sacrifice client services by failing to invest in technology to improve efficiency.

This fate can be avoided with a proactive approach to cash flow management.

4 tactics for a stable financial future.

Here are four areas to focus on to help understand and eliminate your firm’s cash flow challenges and achieve financial stability:

1.  Scrutinize expenses with resource management software. 

More than 9 of 10 law firms surveyed say budget pressures impact how they resource litigation work. Technology specifically designed to manage the use of law firm resources enables you to 1) identify, enact, and monitor highly targeted cost-cutting measures and 2) allocate firm resources more efficiently and effectively. 

Insightful data on resource utilization guides you in eliminating redundancies and unnecessary tasks, optimizing staffing levels on each matter, and minimizing costs and expenses for an overall more efficient and profitable practice.

2.              Leverage legal technologies for efficiency. 

Digitizing workflows increases efficiency, helping to lower operational costs. In one survey, 89% of law firms said legal tech adoption enhanced efficiency. With the right software, you can automate administrative tasks such as document assembly, time entry, and billing. You can also automate discovery tasks such as document collection, review, and production. Software platforms for client, case, and matter management automate and simplify operations. When lawyers and staff are freed from manual activities, they can spend more time finding and serving clients. Plus, automation brings data, and data brings predictability.

3.              Embrace alternative fee arrangements. 

Financial and resource management data lets you identify each matter type’s typical resource needs and related costs. Explore alternative fee arrangements (AFAs) that align with each matter’s specific resource requirements. For example, retainers or hybrid fee structures, where clients pay a portion of the fee upfront, can offer predictable income and ease the pressure on cash flow during long cases. AFAs are increasingly common, with 72% of law firms surveyed saying they expect revenue from AFAs to increase in 2025.  

4.               Explore third-party litigation funding.

Litigation funding provides fast access to capital upfront to cover costs and expenses. You repay the funding, typically with interest, upon a successful case resolution. 

Third-party funding releases the cash flow squeeze, driving the Am Law 200 firms’ share of new third-party funding commitments to grow from 28% to 35% from 2022 to 2023. You get the resources to pursue cases without sacrificing client service or growth opportunities. As the potential value of your cases increases, so do your revenue opportunities.

At Amicus Capital Group, we have been helping law firms succeed for over 25 years. Contact us today at 1-877-926-4287 to learn how our services can help your firm achieve long-term financial stability and success.