JD Journal » collections

Third Quarter Report from Citi’s: Robust Collections, Slowing Demand

chelsei — Fri, 02 Dec 2011 16:46:05 +0000

A quick look at the numbers for the first three quarters of 2011 suggests that there is good news for the law firm industry–and some cause for a little concern. Collections were strong during the third quarter, but growth in demand slowed down, leading to a notable reduction in the growth of inventory–work that has been performed but not yet collected on. Now, as we head toward the end of the year, firms are seeking gains in profitability will need to consider carefully just how hard to push for collections and how many expenses for 2012 to prepay in the fourth quarter of 2011.

For the first three quarters of 2011, revenue was up 5.2 percent across the industry, gaining a bit of momentum from the middle of the year. The increase was driven by the strong inventory levels at the end of the first half of 2011, rate increases holding steady, and a likely continued improvement in realization–all of which would offset the slowdown in demand growth.

The law firm leaders were definitely right to be concerned. Cumulative growth in demand for the first nine months was 1.5 percent, which is down from 1.8 percent during the first six months. This indicated that growth in the demand slowed to only 0.9 percent for the third quarter. This is probably the result of the slowdown in transactional work caused by the market shake-up. The slowdown has hit Am Law 50 firms (which is the 50 highest-grossing firms on The Am Law 100) pretty hard.

The collections in the third quarter of 2011 were so strong that revenue growth outpaced expense growth. This was a reversal of the trend we had seen at the midyear point, when the expenses were growth at a much faster rate than the revenue. The result was an easing of pressure on profit margin across the industry.

At 3.7 percent, the rate increases held steady from the midyear point, continuing to slightly outpace the industry growth rates that were seen back in 2009 and 2010, though they are not back to the levels of 2001-2008. Anecdotal evidence suggests that realization improved or at least stabilized for most of the firms. The rate increases and improved or stabilized realization might have contributed to an easing of the pricing pressure throughout the first nine months of 2011.

The expenses, which had already risen by 4.7 percent during the first half of 2011, continued to gain momentum during the third quarter, as they have now increased 5 percent across the industry for the first nine months of this year. This was driven by a continued increase in operating expenses–and in compensation expenses, since there has been a slight uptick in head court during the third quarter, most likely due to the entry of first-year associates.

Stinson Morrison Hecker Lays Off 30 Staffers

Erik Even — Thu, 05 Mar 2009 00:36:59 +0000

Kansas City’s Stinson Morrison Hecker let 30 people go on Monday.

No attorneys were affected.

“We were going to do this over a period of time, but we decided that with the economy the way it is, there was no reason to prolong it,” said managing partner Mark Foster.

Foster said those laid off included secretaries, record clerks and people responsible for billing and collections. The layoffs were spread out among the firm’s offices in Kansas City, Overland Park, St. Louis, Wichita and Phoenix.

Stinson, which has no plans for further layoffs, is the fourth largest firm based in Kansas City with about 340 attorneys.

Chicago Forgets to Fire Law Firm

Erik Even — Thu, 22 Jan 2009 21:15:48 +0000

A prominent law firm paid $38.1 million to collect overdue Chicago parking tickets and other debt is still rolling in city business, one year after it was supposed to be fired for bankrolling an Arizona trip for a high-ranking Revenue Department official.

Last February, the collection-services law firm of Linebarger Goggan Blair & Sampson was accused of picking up the 2003 travel tab for First Deputy Revenue Director Robert Forgue, even though Forgue had contract management authority over the firm.

Forgue resigned his $137,000-a-year job after Inspector General David Hoffman recommended his firing. Hoffman also urged the city to stop doing business with the law firm, which had raked in $33.6 million since 2002. Corporation Counsel Mara Georges agreed.

Instead, the firm was paid $4.5 million last year for 11 months of collections. In November, the firm was awarded a five-year, $3.4 million contract for “claims management, collection and cost recovery services” stemming from damage to city property.

A Revenue Department employee, who spoke confidentially to the Chicago Sun-Times, blamed the city’s reversal on the “web” of former Revenue Department officials who now work at Linebarger. They include Cathy Murray, head of the law firm’s Chicago office, and Evelyn Ramsey and Matthew Fleming.

The idea of corruption in Chicago or in Illinois is, of course, ludicrous.

Deputy Revenue Director Phil Cobb said Linebarger has assured the city that the employee involved in arranging Forgue’s trip “no longer works on city business, was removed from the Chicago office and no longer receives any compensation” from the city.

Via CST.

Law Firms Race to Collect Year End Billings [Video]

Erik Even — Mon, 29 Dec 2008 21:51:34 +0000

Via LawCrossing.com:

At year’s end, white-shoe law firms race to collect the bulk of the year’s client fees by the end of December.

This year is different though, with a number of law firm managing partners worried that the current recession will make the job of collection even tougher.

Most law firms bill every three months, or even every six months, which is why the payments take so long to come through. Law firms typically use traditional methods of collection, such as calling clients and reminding them to pay with the partner involved often making the phone calls.

Many merger and acquisition deals fell through in Wall Street’s downfall, which makes it likely that some clients will balk at high fees for deals that never got done.

– Martine Beerman