Business advisors have told law firms to improve their practice management if they want to emerge from the challenges of 2011.

Members of the Institute for Turnaround (IFT) warned there are too many firms that are failing to recognise or deal with financial problems early enough.

The organisation said recent triggers involving Legal Services Commission payments, changes to personal injury funding and the increasing cost of indemnity insurance premiums have all put smaller firms under immense strain.

The IFT said a lack of financial and operational understanding could lead to more firms running into financial difficulties.

Martin Jesper, IFT practitioner in the north-east, said: ‘We have seen first-hand how recent challenges have put additional pressure on firms this year, and with even more impending changes to be implemented throughout this year, law firms will continue to feel pressure to perform.

‘It is comparatively easy to move around numbers on sheets of paper, but it is only through people that organisations can implement the changes they need to turn around, to drive performance and to achieve fast growth.’

The professional body is advising law firms on ways to deal with financial uncertainty in 2011 and says there is still hope for adaptable practices.

Darem Bekisz, IFT northern chairman, added: ‘As long as firms’ management acts quickly and engages with their stakeholders to identify simple and sustainable actions that can be implemented effectively, law firms will not only remain solvent, but they can go on to grow and prosper.’