COVID-19 is having a major economic impact on business both small and large, including law firms.
From dealing with lost revenue to worrying about staff layoffs, law firm owners are grappling with the same challenges as businesses around the world.
Last week’s Law Firm Leadership Collaboration Circle focused the conversation on how attorneys can weather the financial upheaval caused by Coronavirus shutdowns and quarantines in the coming weeks and months.
While the majority of firms are facing similar issues, there are a number of relief options available to help limit the economic impact on your practice.
Financial Challenges Law Firms Are Facing
Cash flow concerns were the most common apprehension for attorneys as the COVID-19 crisis continues to intensify.
And while most have yet to feel the financial squeeze, it was a nearly universal sentiment that it is only a matter of time. Additionally, it may take months before the full effect of the economic slowdown hits.
The financial uncertainty leads to a number of common concerns, including:
- Will I be able to make payroll?
- Will I be able to keep my entire staff?
- How long before billing is impacted?
- How will court systems being shut down impact current cases?
Unfortunately, there are no definitive answers to these questions. However, there are some tools and programs available to businesses that can help you get through this rough patch.
Consider Open Book Financial Policy
Something many law firms and small business offer is an open book policy with the company finances.
Offering transparency into your firm’s financial state can help lend credibility to messaging if you are either concerned with status or trying to dissuade employee concerns.
Small Business Loan Programs
There are several government loan programs available that law firms should be encouraged to take advantage of. The first and most beneficial is the
This program is designed for small businesses and will earmark 2 ½ months of payroll for your business. These funds are designed to keep your employees working and include forgiveness if all employees are kept on payroll for eight weeks. These funds can be used for payroll, rent, mortgage interest and utilities.
The Disaster Loan Assistance Program is another option for businesses impacted by COVID-19. This will earmark up to $2 million in operating expenses; however, interest will be applied to the loan right away.
Additionally, the SBA is offering an Economic Injury Disaster Loan Advance of up to $10,000 that is available within minutes of applying. This grant does not have to be repaid.
Executive Compensation / Deferred Compensation Plans
For higher level executives and partners who may not rely on their monthly paychecks or bonuses to get by, you may be able to work out a deferred compensation plan to help keep additional liquidity available for lower level employees.
For example, instead of paying a profit-sharing bonus in April, push it to the end of the year with additional interest included.
Legal Back Office has also created a simple financial workbook to help you understand your firm’s current cash flow status and how far your reserves will take you.
This resource is available for download here.
Ending On A Positive Note
The COVID-19 crisis is certainly putting strains on many law firms across the country, but it’s always beneficial to look for positives in any situation as opposed to focusing on the problems.
As many firms move to remote work environments, they are finding ways to stay connected with clients, as well as staff.
For example, Zoom happy hours are a great way to keep in touch with employees in a more relaxed and informal setting. These allows for open and honest feedback, as well as an opportunity to brainstorm ideas for improvement.
Additionally, with many courtrooms now closed, you may find yourself with more hours available in your day. Try reaching out to clients and offer free phone or video consults to help stay in touch and offer assistance any way you can.
The Coronavirus has certainly brought many industries to a grinding halt, and the future is anything but certain; however, there are plenty of opportunities out there to help you get through this challenging time and come out on the other side stronger than ever.
Be sure to join our next Law Firm Leadership Circle, which will be covering People Priorities: How Do We Lead Well During Times Of Uncertainty?