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I am always surprised by how many choose not to utilise the Legal Aid Agency’s (LAA) payment on account (POA) utility for profit costs. Those same firms do however submit POA’s for reimbursing disbursements and it is something I have found puzzling.
Having spoken at length about this with several firms, many state that disbursements are different and that they have to submit POA’s for those, as the firm has physically paid these out at the bank and requires reimbursement. The argument generally is either that there is too much paperwork when it comes to profit cost POA’s or that the firm doesn’t feel it needs to submit them and can happily wait until the final bill is received.
It is my opinion that by not utilising the LAA’s POA option, firms are sacrificing good cashflow. The argument for only submitting POA’s for disbursements due to physical payments being made from the bank account but not doing the same for profit costs does not “hold water” in my view. Payments are being made throughout the month from a business’s bank account to accommodate the staff working on the cases as well as their support staff and structure. The bills for running a successful law firm still need to be paid and staff expect their salaries at the end of the month. Not only that, but there can also be unexpected costs which can be significant causing a sharp dip in the bank balance which the company then needs to recover from. Therefore, funds are being physically paid from the bank account simply to do the work, so why should the firm not submit POA’s to recover those costs? It is important for a law-firm to have stable cashflow and I believe that rather than having dips and spikes, the aim should be to have a steady and constant incline where possible. Submitting POA’s will help make this possible as they can cover the general running costs of the firm and leave enough headroom for unexpected expenditure.
Here are the rules from the LAA about claiming POA’s:
Payments on account in civil cases
In civil representation cases you are entitled to claim a Payment on Account (POA) for your profit costs incurred throughout the life of your legal aid certificate. This is subject to the following restrictions:
- certificate has been live for at least 3 months
- you claim within the agreed cost limit of the certificate
- you do not claim more than 4 profit cost POAs within a 12-month period
You will be paid 80% of the costs incurred to date. In a fixed fee case, up to 80% of the applicable fixed fees can be claimed. Payments under the Family Advocacy Scheme (FAS) can be claimed up to 100% of the costs incurred as a POA.
The above guidance gives the firm the option to claim 80% of the costs incurred on a case up to four times per year. If the firm is handling a long running or high cost case, that is a significant increase in cashflow especially if we then extrapolate that process across all cases. Leaving the claim until the end means the firm has no remuneration at all until the very end, which could be a significantly long time.
The LAA has also made it a lot easier to make claims using the Client & Cost Management System (CCMS) where the claim can be submitted, tracked, and queried all within the system. Gone are the days where POA’s needed to be substantial paper forms that required completing and posting to the LAA. Also because of the faster submission rate, there is a faster payment rate too. The lead time from submission to payment is significantly lower than during the paper submission days and the LAA pay firms weekly via BACS as opposed to monthly. This weekly cash injection will significantly increase cashflow and keep the bank account balance stable with that all-important headroom.
My recommendation would be to review all open cases, checking the certificates have been live for three months or more and their cost limits. I then recommend putting in place a process where each file has a POA submission every three months. That way the firm will have a steady income from POA’d cases on an ongoing basis.
This is an easy opportunity to bolster stability and I recommend all civil legal aid practices look into it.
Alex Simons
New Business Manager
The Law Factory LLP
