“Normally, whenever there’s a change in the world, it’s good for professional firms because it creates more work. I’ve no doubt the virus will create plenty of work for legal and accountancy businesses later but at this current stage the concern should be about short-term cash and ensuring the firm will be able to ride out this crisis.

“How badly you’ll be affected depends on the client sector you’re in and the type of work undertaken. If your niche sector is tourism, it’s going to have a bigger impact than if your core area is insolvency. Most professional firms do a range of things. Some activities are going to be badly hit; others may experience more demand. In aggregate, it may not be as bad as people first feared, provided they can survive the short-term hit to their cash flow.

“A big short-term impact is that some transactional work will get delayed, but assuming this crisis does come to an end in a few months, there will be a catch-up period.

“In the past, when law firms have been short of money, some have ‘borrowed’ from the client account. Obviously, they shouldn’t, but we could hear stories of firms doing this in the months to come.

“There’s an ongoing requirement to report to the Solicitors Regulation Authority (SRA) if the law firm is financially unstable. We may see a rewriting of the definition of what that means when this is over.

“As somebody who has written a large annual survey in both the accounting and legal sectors with the bank, I get to see the levels of debt firms carry in normal times, and the sector’s aggregate debt is low. About 50% borrow to a degree, and then 50% have money in the bank.

“This means if firms suddenly have a weakness in their cash flow, a bank would almost certainly lend them money because they’re not as highly borrowed as some other customers. There’s scope for well-run firms to go to their bank with a clear plan and borrow money.”

“It’s easy for firms to panic, but what they’re trying to balance is short-term cash flow against long-term loyalty of key members of staff. Given the most significant expense in a firm is staff, they might be tempted to make people redundant or ask them to take pay cuts and reduced hours. If you’re a firm that does that more aggressively than others, the moment this is over, it’s going to be challenging to hang on to your staff.

“But if you do have to cut back on salaries as the biggest expense, it’s better dealt with it by bringing holidays forward, offering reduced hours or unpaid leave, and furloughing. Furloughing some or all staff may prove the most popular option among firms for now.

“You have to assume the pandemic will end and you’ll still want to employ your people afterwards. The number-one thing other than cash flow is good communication with staff. Take time to understand the personal financial position of all employees and which might have personal cash-flow problems.

“You can design a scheme for staff that sounds fair in aggregate, but you still have to consider every individual employee. Most employed lawyers and accountants are on reasonably high salaries and could probably cope for a while if they had to take a payment reduction or payment deferment. But there may be more junior people who haven’t had a chance to save who will be in a difficult position quickly. The people who can suffer the pain more easily would probably like to see the firm trying to help those who are struggling.”

“We don’t know the full details of how HMRC is going to work yet, but firms will be able to defer their next VAT payment for a year, and they can always talk to HMRC about Time To Pay arrangements [which allow you to pay in instalments over a longer period of time].

“The greatest expense in firms is staff, but a chunk of what you’re paying your employees is deducted and paid on to HMRC, so you’re almost negotiating with HMRC and your staff on that considerable expense.

“If you’re a firm with fewer than 250 employees, when people are off sick with the virus, you can get full repayment of 14 days’ statutory sick pay. It’s not a massive amount, but it’s something to build into your cash-flow projections.”

“It’s still early days and we don’t know for sure what guarantees will be required if firms ask banks for additional loans. But the advice to anybody would be: talk to banks sooner rather than later. Don’t leave it until you’ve run out of money. If you demonstrate how you’re going to manage the crisis, you’ve got far more chance of getting support.

“There is also the new Coronavirus Business Interruption Loan Scheme where firms can get loans of up to £5m for up to six years. Banks are lending the money, and the government guarantees 80% of the loans. It’s roughly the amount of money that would cover the short-term financing needs of most law and accounting firms during this crisis, although not the biggest ones. The Big Four banks have said they will not take personal guarantees on loans of up to £250,000 made under this scheme.

“You can borrow from three months to six years and it will be interest-free for the first 12 months.”

“The most important thing is to keep doing detailed cash flows for the next three to six months. While firms would typically do these once a month, now they should do them every week as a minimum because things are changing quickly. Firms need to see if there’s going to be a pinch point, so they can take action sooner rather than later.

“They should focus on the most easily generated cash from the work that has already been done. The WIP you haven’t even billed yet it is some way from being collected, whereas, with your debtors, you’ve already done the work and billed for it, so you should be chasing them immediately.

“Think about the types of work that generate cash quickly. Focus on cases where you’re close to settlement and push them.

“Most professional people are bad at managing their lock-up. As a consequence, they probably have considerable WIP and debtors, as many firms are close to their financial year ends. The year-end billing run should be a priority.

“Professionals tend to do the work then bill and collect it, so they could try and get more money upfront in a positive way. When clients ask for a discount, firms could take some money upfront in return for the discount.

“Proactivity will be key in these times as things are changing so rapidly.”