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Sole Trader Lawyers Cashflow problems

28 June 2019

Sole Trader Lawyers Cashflow problems

I am a very worried solicitor. My legal practice is under growing pressure from all sides. How can you help me solve these problems, restructure and survive?

Help for lawyers - sole trader practice.

If you are practising as a sole trader you are of course personally liable for the business and personal debts you have built up. What should you do if the practice is struggling?

First thing to do is to establish if you are insolvent. see the 3 tests below

The Cashflow Test

Simply - can you pay all of the debts when they fall due for payment?

For example, if you are not paying the deductions from employees for NIC and PAYE across to the Inland Revenue on the 19th of the month following the month they were deducted, then you could be insolvent. Have you met loan repayment dates for practice loans or bank loans?

If your trade creditors sell to you on say 30 days terms and you regularly pay on 90+ days, then you may be insolvent.

Make sure that you have an up to date list of all debts to helps us advise you on your options.

The Balance Sheet Test

Simply - do you owe more than you own as an individual or are your business and personal assets exceeded by your business and personal liabilities? If yes, then you are insolvent on the balance sheet test.

It is important to point out that this test should include contingent or prospective liabilities. (If you need advice on these issues email us).

The Legal Action Test

If a creditor has obtained a County Court Judgment, this may demonstrate your insolvency and the creditor may petition to bankrupt you.

If a creditor has obtained a statutory demand for greater than £5000 (previously £750 - new ruling came into force 1st October 2015) and it remains unpaid for more than 21 days, then the creditor may petition to bankrupt you.

What next?

The second thing to do is to use our free daily cashflow spreadsheet and set out the expected cashflow in and out of the business over the next few months.

If you need any advice on filling this out we will provide this free of charge. Please call 0845 5194930

This tool will set out what the likely cash position is in the business over the next few months and will help YOU decide which is the most appropriate option. If cash is drying up and there is no way to fix it then bankruptcy could be the option, please see Plan C below.

If cash is tight but still flowing then Plan A or B should be considered. If you know that good fee income and cashflow is coming through in the next few months then Plan A can be a powerful way to buy that time.

Now please read our guides to

Plan A trading out and refinancing (avoid insolvency)

Plan B IVA or individual voluntary arrangement

Plan C Bankruptcy

A Worried Director

The Ultimate Guide For Worried Directors

Worried about poor cashflow? Feel you have got into a bit of a mess? Covid-19?, How to pay wages on pay day? For reassuring advice on a range of issues download our free Ultimate Guide For Worried Directors today. Or just call us on 0800 9700539

"KSA Group which owns this site, will help you fix problems in your business. We won't charge for any initial advice or face to face meetings. We speak in English. We will save you money and your precious time.  You can come to any of our offices

"We also follow up any meeting with a full "solutions report" which runs on average to 13 pages valuable free advice!!  No other practitioner offers this service.  In this report we advise on ALL the options and explain them clearly.  We advise on a course of action given the information you have given us ( the more information we have the better we can advise!)"

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