This week's announcement by pre-settlement lender Ask Funding that Slater & Gordon and Trilby Misso have signed on to its disbursement funding facility, signals a move by firms to better manage their cash flows.
Australia's disbursement funding market is estimated to be worth approximately $300 million according to Ask Funding. Managing director Russell Templeton said this reflects the changing business of law and the importance now being placed on cash flow management.
Explaining how the disbursement market evolved, Templeton said in a market that does not allow contingency fees (as in the United States), Australian lawyers have found themselves having to churn their time on a no-win-no-fee basis - while also having to outlay money on behalf of their clients.
"The legal sector is currently relying on large overdrafts or partner loans to pay for disbursements required to run no-win-no-fee personal injury cases for clients, placing large imposts on cash flows and capital needed to fund growth," he said.
"The research that we've had done shows there is about $300 million out in funds that have been advanced by lawyers on behalf of their clients."
To overcome this, Ask Funding developed the funding facility, which allows firms to draw down funds into their trust accounts on an as-needed basis to cover personal injury case outlays until proceeds become available from case settlements.
Slater & Gordon and Trilby Misso add to a list of approximately 30 personal injury firms which have already taken up the facility - developed by Ask Funding only a couple of years ago.
And it is expected that other firms will follow suit, particularly since the global financial crisis as lawyers begin to focus more on the management aspects of their businesses.
"The banks have got a lot tougher because of the global financial crisis with respect to credit facilities being made available," said Templeton.
"The lawyers are also starting to realise they need to approach this in a far more business-like way and understand the benefits of cash flow."
Templeton adds that he believes his cash flow product will become the industry norm: "When you get two market leaders like Slater & Gordon and Trilby Misso taking up the product it sends a loud message to the industry that this the direction in which it's going."
- Briana Everett