Legal Services

Sector Payment Analysis: Legal services

The analysis of payment behaviour within the Legal services sector reveals a landscape defined by a sharp contrast between a compliant majority and a volatile minority. Whilst the median payment time stands at a respectable 29 days, indicating that the typical company adheres to standard commercial terms, the arithmetic mean is notably higher at 37.1 days. This discrepancy between the median and the mean is the first indicator of skewness in the data, driven by significant outliers. Furthermore, the standard deviation of 53.4 days is exceptionally high relative to the average. It is crucial to realise that such a high deviation suggests that whilst the centre of the distribution is stable, payment reliability varies drastically across the broader sample, making cash flow forecasting challenging for suppliers dealing with a diverse client base in this industry.

When we organise the companies by payment speed buckets, the sector demonstrates a clear favour towards prompt settlement. A robust 61% of the 100 companies analysed settle their debts within the 0-30 day window, and the data indicates that 70% of all payments are finalised within a month. The interquartile range of 16 days—spanning from a 25th percentile of 23 days to a 75th percentile of 39 days—further confirms that the core performance of this sector is consistent and relatively efficient. However, this positive behaviour is not universal. Approximately 23.6% of payments are classified as late, and 11.3% of the sector takes over 60 days to pay. This bifurcation suggests that whilst most entities are reliable, nearly a quarter of the sector presents a moderate to high credit risk.

A granular review of the outliers explains the statistical volatility observed in the standard deviation. The dataset includes a distinct group of top performers, with 19 companies settling invoices in under 20 days and the fastest payer settling in just 2 days. Conversely, the tail end of the distribution is concerning; the slowest payer recorded a delay of 538 days. Such extreme delays, alongside the 3% of companies in the critical 90+ days category, significantly jeopardise the average performance metrics. For an analyst specialising in risk assessment, these extremes highlight the necessity of stringent credit control measures. Suppliers must be aware that whilst the probability of prompt payment is high, the impact of a "bad payer" in this sector can be severe due to these extreme outliers.

Finally, the geographic distribution of the sample is heavily London-centric, with 66 of the 100 companies based in the capital, whilst other regions such as the North West and Yorkshire and The Humber are less represented. This suggests that the payment culture described is largely reflective of London-based business practices. In conclusion, the Legal services sector appears healthy on the surface, driven by a conscientious majority. However, the underlying data warns that amongst the prompt payers exists a small but dangerous cohort of poor performers capable of inflicting significant cash flow disruption.