Redwood Analytics

The 2009 ACC/Serengeti Managing Outside Counsel Survey, as reported at Association of Corporate Counsel's annual meeting this week in Boston, has some interesting notes which are relevant to what we've been blogging about lately:

• Predictability of costs, and reducing outside legal spending ranked as a number one concern for in-house counsel
• Use of alternative fees, including fixed fees, retainers, and contingency fees, have risen (in response to that #1 concern!)
• In-house counsel are using other methods, like requiring minimum experience levels for associates and requesting discounts for early payment of bills, at unprecedented levels to control costs

My colleague Russ recently wrote about the use of fixed fees, retainers, and contingency work in response to both concerns from corporate clients and the desire of firms to balance efficiency and profitability with client satisfaction.  And we've written numerous times in the past about associate qualifications and training. 

Something that we haven't given as much press to lately is billing and collecting, and the impact it can have on profitability and client satisfaction.  If clients are looking for a 2% or 4% discount for early or on time payment, we see no reason not to offer it, as a part of a timely billing and collections process.  Emphasis on timely.  As A/R ages, it diminishes in value, due to both the time value of money, and the probability of never collecting the outstanding funds.  By 365 days, the likelihood of collecting is 20% - so that $10,000 bill is valued at only around $2,000.  But that's an extreme example. 

As we mentioned in the past, the average law firm has 78 days of unbilled work.  If you figure it takes an additional 60 days to collect once the bills are sent out, that is a gap of 138 days, or easily more than 1/3 of the year, between when services are performed and when the firm has the payment in hand.  If a 2% discount were offered for payment within 30 days, you would have freed up cash for reinvestment equal to a month of fees, minus the 2%, and attained some measure of revenue predictability.  If you can speed up your billing process, the benefit of time and certainty is further enhanced. 

It's a win-win, for both your bottom line, and for client satisfaction, as evidenced by the ACC survey.