Cash flow planning for self-employed barristers

Barristers are often described as cash rich and time poor. In reality many are neither. Fees arrive months after the work is done, tax is paid in large lumps, and income can rise and fall sharply with the court lists. Cash flow planning is not about becoming an accountant. It is about knowing, with reasonable confidence, what money will come in over the next few months and what has to go out, so that a quiet month or a slow payer does not turn into a crisis.

Why the Bar is especially exposed

Most small businesses are paid within weeks. Barristers frequently wait much longer. Publicly funded work can take months to be assessed and paid. Privately paid solicitor work depends on the firm's own billing cycle and, in practice, on whether the lay client has paid them. A busy junior can easily have the equivalent of several months' income sitting in work in progress and unpaid fee notes at any one time.

On top of that, self-employed barristers usually pay income tax and Class 4 National Insurance through self-assessment, with a balancing payment and the first payment on account both due on 31 January, and a second payment on account on 31 July. In a year when income has risen, the January bill can be startlingly large, because it covers last year's shortfall and an advance on this year at the same time.

Step one: know your numbers

You cannot plan what you cannot see. Set aside an hour and gather three figures.

Fixed monthly outgoings. Chambers rent or expenses, clerks' fees, practising certificate, insurance with the Bar Mutual, subscriptions, software, travel, and your own drawings for living costs.
Outstanding fees. Every fee note issued but not paid, with its date. This is your aged debt list.
Work in progress. Work you have done but not yet billed, or that will be billed on conclusion of the case.

Most practice management systems will produce the first two. The third usually needs a short conversation with your clerk.

Step two: build a simple twelve month forecast

A spreadsheet is enough. Put the months across the top and two sections down the side: money in and money out.

For money in, be honest rather than optimistic. Use your own payment history to estimate when fees will actually arrive. If a particular firm usually pays in ninety days, forecast ninety days, not the thirty in the terms. For legal aid work, use realistic assessment and payment times.

For money out, include the tax dates, VAT quarters if you are registered, insurance renewal and any large annual costs such as a practising certificate or a conference. Then look at the closing balance for each month. The months where it dips are the ones that need attention now.

Step three: separate the tax money

The most effective single change most barristers can make is a separate savings account for tax. Every time a fee arrives, move a fixed percentage across before you do anything else. The right percentage depends on your income and whether you are VAT registered, so ask your accountant for a figure, but many practitioners find somewhere between a quarter and a third of gross receipts is a sensible starting point for income tax and National Insurance. VAT collected should be moved across in full, because it was never your money.

Treat that account as untouchable. When January arrives, the bill is a transfer rather than a scramble.

Step four: build a buffer

A cash reserve covering three to six months of fixed outgoings turns a slow quarter into an inconvenience rather than an emergency. It also gives you the freedom to turn down work that is badly paid or unsuitable, which matters for both your practice and your wellbeing. Build it gradually, perhaps by directing a fixed amount from each fee into it, and do not count it as available for ordinary spending.

Step five: speed up what comes in

Small changes in billing habits make a large difference to cash flow.

Bill as soon as work is complete, not in a batch at the end of the month.
Agree staged billing on longer cases rather than waiting until conclusion.
For direct access clients, take fees in advance of each stage of work.
Review aged debt every fortnight and chase consistently.
Consider whether a mix of work with different payment profiles, for example some privately paid advisory work alongside publicly funded advocacy, would smooth the peaks and troughs.

Payments on account and reducing them

If you know your income will fall this year, perhaps because of parental leave, illness or a change of practice area, you may be able to apply to HMRC to reduce your payments on account. Be careful. If you reduce them too far you will pay interest on the shortfall. Take advice from an accountant who understands the Bar before doing so.

Review it monthly

A forecast is only useful if it is kept up to date. Once a month, replace the forecasts with actual figures, roll the plan forward and look again at the months ahead. It takes twenty minutes once the template exists, and it means that the first sign of a problem appears in a spreadsheet rather than in a declined card payment.

Get help with the parts that drain your time

Good cash flow depends on two things barristers rarely have time for: chasing fees and keeping the diary full with well paid work. If you would like help with both, join the Clerk&Counsel panel. We provide clerking support and introduce instructions to independent barristers, so you can spend more of your time on the work itself.