How One Law Firm Built a Cash Reserve Strategy After Surviving a Near-Bankruptcy

Kimberly Green | 2026-04-14

How One Law Firm Built a Cash Reserve Strategy After Surviving a Near-Bankruptcy How One Law Firm Built a Cash Reserve Strategy After Surviving a Near-Bankruptcy The crisis was over. The checks cleared. The firm didn't collapse. But sitting in the aftermath, the managing partner knew something had to change. Surviving a near-bankruptcy means nothing if you're just one bad case settlement away from repeating it. This is the story of a mid-sized personal injury practice that learned the hard way—and then fixed it. The Built-In Cash Gap No One Talks About Personal injury law has a structural problem baked into its economics. Cases take years to resolve. Expenses come now. Reimbursement comes later. Your firm advances the money for depositions, expert witnesses, medical records, court filings, and investigative work. For two years, maybe three. The case settles. Finally, you get paid back. But in the meantime, you've been funding the litigation out of your operating account. Scale this across dozens of active cases and you've got a hidden cash drain that doesn't show up in revenue numbers. You're profitable on paper. You're broke in reality. This is the structural problem that nearly every personal injury law firm faces—and that most don't have a strategy to handle. That's what happened to this firm. The Solution: Separate the Cash Flow Problem from the Operating Account After surviving the crisis, the firm worked with Brandy Derrick, CPA and founder of Legally's Bookkeeping, to restructure how case expenses were funded. The insight was simple but powerful: case expenses don't need to come from your checking account. They can come from someone else's. The firm established a credit line specifically for case expenses. Not a line they'd grow into. Not aspirational. A real, available credit facility sized to their actual case load and expense patterns. Here's how it works: instead of paying for an expert witness out of operating funds, the credit line covers it. Your operating account stays intact for payroll, rent, and overhead. When the case settles, the reimbursement pays down the credit line. You pay interest on the outstanding balance, but that interest gets covered by the settlement recovery. It's not free—nothing is. But it's infinitely better than depleting your working capital. The Real Change: A Cash Reserve Policy That Isn't Negotiable The credit line solved the immediate problem. But the bigger change was psychological and structural. The firm established a minimum cash reserve policy. Not a suggestion. Not a goal for next year. A rule. That...