Legal services can offer great value in these troubled times

As we peer through the economic gloom, there is more than a glimmer of value to be found in a wide range of legal services, says Hewitsons' Dominic Hopkins.

Times are hard for business and investment has pulled up hard at the lights. While some banks are doing what they can to make funds available for existing customers, the general climate is one in which the financiers are inevitably risk averse - 'once bitten, twice shy'. Most banks are driving hard on pricing as well. Growing a business is problematic at best and for many it is simply a case of keeping your head above water..

Should we therefore just pack up shop and take the next ship to Norway? Not quite yet. There is work to be done. There are strong products and services around and there are opportunities to hone a business into a lean and keenly efficient vehicle for growth in the new economic environment. There is money out there, and it will be the businesses with the strong, well priced product or service, that will attract investors over the coming months.

Sure, expectations of growth will need to be reined in to match market conditions, and, if you will forgive the IT metaphor, some businesses may need to 'reboot' entirely. But, at the risk of sounding trite, there are some strong fundamentals in the region's economy. They have not gone away overnight, nor over the last six months.

Taking unnecessary cost out of the business is a central component of any strategy to achieve that lean, efficient shape. But taking out too much cost or the wrong cost can be fatal, leaving the business starved of the oxygen it needs to breathe and therefore survive. Getting the right balance can be tightrope-like in its difficulty. Two other key strategic priority areas are customer management and an improved cash position from careful sales ledger management.

So, where can legal services support these management priorities and provide essential value? When sales are thinning and the temptation is to look for the next customer, any old customer, something needs to be done that is counter intuitive. There is a need to stop and assess the new 'date'. Stand back and check his or her credentials. What do they look like? Are they good for the money? Credit insurance is thin on the ground, and an increasingly rare fallback position on which to rely.

There is an increasing need for businesses to be prepared to have that difficult conversation and recognise things may not go swimmingly well in current market waters. Careful definition of the relationship is beneficial to all concerned and there is a premium on reducing the opportunities for disagreement later on down the line. This is where outsourcing legal assistance on a supply agreement or getting advice on how to incorporate your standard terms in your dealings can add value and assist in achieving overall efficiencies.

Another area of priority will be improving management of the sales ledger. Reducing debtor days is going to make your creditor happy while keeping on top of aged debts may give you early warning of a pending customer insolvency. This may also help to avoid or reduce a write-off. The exercise can be very time consuming for hard pressed accounts staff whose attention is focussed on achieving cost efficiencies. However, seeking collections support from specialist debt service lawyers who have tested systems designed to maximise recoveries can improve cash recovery at a rate that can pay for itself. Managers may even get brownie points from the bank or invoice funders for grappling with a troubled ledger in this way.

This issue of customer credit risk must inform trading decisions in troubled times. Managing credit accounts with the support of director guarantees or security over a customer's assets can provide that additional assurance that sustains an order book just when it is required. Specialist legal assistance to put guarantees and security in place and deal with any priority issues with the customer's bank, can give a business the confidence it needs to commit itself to new market opportunities.

Let's be straight though. However efficient we are, when money is tight, sadly business relationships can become strained, sometimes to breaking point. When this happens, knowing your legal rights and options, and being able to find your way out of a disagreement is what is required. Bringing in an experienced disputes lawyer at an early stage can make all the difference. Brought in sufficiently early, litigation may be avoided and the business may have more options. This can produce a real cost saving.

Finally, what about peace of mind that if it does not all go to plan, you know you have done all the law expects of you? Corporate governance advice, for example on directors' duties, is not the kind of value that finds its way tangibly on to the balance sheet, but it can provide the essential confidence that is required to chart a way forward for the business.

For more information on how Hewitsons can help you, contact Dominic Hopkins on 01604 233233 or click here to email him.