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Large law firms are reducing payments to partners in a clear sign the sector is struggling with the uncertainty of the coronavirus pandemic. While the most prominent law firms have the cash reserves to mitigate the damage – at least for a while – many small and medium-sized firms are in a precarious position. We take a look at the risks to law firms and how data can help manage those risks.

As an increasing number of firms indicate high levels of financial distress, business asset prices are being undermined and look set to collapse. The economy is grinding to a halt, leading to an oversupply of assets with no willing buyers.

130,262 London businesses are now in significant financial distress, compared to 123,163 during the same period in 2019 – that’s a 6% increase. The analysis of businesses from Q1 this year shows that the 12-month increase in the number of businesses at serious risk of failure in the capital was just above the national average growth of 5%.

For many businesses, cash flow is the number one problem right now. With a sudden (and in some cases, complete) drop in revenues from the lockdown, cash is tighter than ever. Not only are new sales coming to a halt, but existing bills aren’t always being paid.

The coronavirus pandemic has been a strange and testing time for the accounting profession. Firms are facing their own business challenges while at the same time working closely with clients that are facing significant problems.

Accountants have always been undervalued in business, particularly in SMEs, where many directors see them as an expensive overhead. At a networking event in February, I was speaking to the director of a successful manufacturing business and he was complaining about the cost of his accountant.

The precarious financial position of high street stalwart Clintons was bolstered somewhat last month after a pre-agreed deal with its existing US owners bought it out of administration, safeguarding 2,500 jobs. However, the card and gift retailer remains on shaky ground and is still a long way off from returning to profitability.

As the coronavirus pandemic continues to spread across the globe and more and more countries go into lockdown, it’s clear that this is an economic shock like no other. High street shops, restaurants and pubs face a challenging few months, but the impact of the crisis may be more extensive than anyone could have predicted.