Your Law Firm’s Debt Problem Isn’t About Revenue. It’s About Cash Flow.

A seven-figure law firm. $1.5 million in revenue. An established team, a respected name in the community. And the owner was actively contemplating bankruptcy.

How? Half a million dollars in debt, accumulated one “small” charge at a time.

That’s the story Darren Wurz shared on a recent episode of The Lawyer Millionaire podcast, and it’s a scenario we hear echoed constantly in conversations with law firm owners. Revenue masks the problem. You can be crushing it on paper and still be one bad month away from closing your doors.

According to the Federal Reserve, roughly 40% of small businesses carry over $100,000 in outstanding debt. If you’re sitting on $100,000 in credit card debt at 29% interest, that’s $29,000 a year just to keep the balance from growing. That’s an admin salary. That’s your entire marketing budget, gone.

The Profit First Approach to Killing Debt

Wurz walks through the Profit First cash flow system as a framework for digging out. The core idea is simple: instead of paying yourself whatever is left over after expenses, you allocate incoming revenue into dedicated buckets (profit, taxes, owner’s compensation, and operating expenses) before spending a dime.

For firms carrying debt, the action plan looks like this:

Get your cash flow visible. You can’t manage what you can’t see. Setting up a structured allocation system is the first step toward understanding where your money actually goes.

Stop adding to the debt. This is the one Wurz says you’ll fight him on, and he’s right. Everything goes on the card. But you cannot pay down debt while simultaneously adding to it. Moving to a cash system, or at minimum freezing the cards you’re trying to pay down, is non-negotiable.

Set aside 1% for profit, even when it feels insane. This is the psychological shift. Telling your brain “we’re profitable and we can do this” changes behavior in ways that pure math doesn’t. It’s the same principle behind building an emergency fund before aggressively paying down credit cards.

Do the real math on operating expenses. After allocating for profit, taxes, and owner’s comp, what’s actually left for OPEX? If you’re keeping 59% for operations on $1 million in revenue, that’s $590,000 to run everything. If your expenses don’t fit in that number, you have a problem that more revenue won’t solve.

Audit every expense, line by line. Start with last quarter, then go back to January to catch annual charges. For each expense, ask: does this definitely produce profit, could it be replaced or negotiated, or do I truly not need it anymore? Start with the big items first, not the $15 subscriptions.

Negotiate with vendors. Put your lawyer hat on. Wurz saved thousands just by asking a long-time marketing agency for a loyalty discount. You’d be surprised what a simple ask can do.

Use 99% of your profit account to attack debt. At the end of each quarter, take almost everything from that profit bucket and throw it at your highest-interest debt. Keep 1% as a small reward, because you’ve earned it.

The Hidden Debt That Doesn’t Show Up on Your Balance Sheet

This is where the episode really hit home for us at CollBox.

Wurz makes the point that many law firms carry a special kind of debt that never appears on a balance sheet: accounts receivable. When clients aren’t paying on time, you are lending them money for free. And that seven-figure firm he mentioned? It had a massive AR problem on top of everything else.

He lays out three rules for getting AR under control:

The 14-day rule: Once an invoice hits 14 days past due, stop all legal work for that client until they pay. No exceptions.

The 90-day rule: Once an invoice crosses 90 days, your chances of collecting drop dramatically. Send reminders at 30, 45, and 60 days. After 90, it’s time to write it off or escalate.

The evergreen retainer rule: Work only begins when the retainer is replenished, or bill monthly and hold the retainer as a reserve. Stop financing your clients’ legal needs out of your own pocket.

And then there’s lockup reduction. According to Clio’s Legal Trends Report, the average firm waits over 90 days to collect on earned fees. If it takes three months to get paid for work done today, you’re carrying 90 days of internal debt. Shortening that cycle even by a couple of weeks can create a significant cash injection, without bringing in a single new client.

Getting Paid Is the Easiest Win

Here’s the bottom line: before you chase new leads or sign up for another marketing package, start by collecting the money you’ve already earned. That’s the fastest, simplest way to improve your cash flow.

We were grateful to hear Wurz give CollBox a shoutout in the episode as a resource for firms that need help recovering unpaid invoices without damaging client relationships. It’s exactly what we do. Our dedicated AR specialists handle the follow-up so you can focus on practicing law, not chasing payments.

If your firm is sitting on aging receivables and you’re ready to turn that into cash flow, schedule a conversation with our team to see how we can help. Or check out our results page to see what firms like yours are recovering.

Your law firm should be building you wealth and freedom, not stress and debt. We couldn’t agree more.