Kris Satkunas; Strategic Consulting Director, and Stephanie Beck; CounselLink Professional Services Manager; LexisNexis:
Virtually every legal department is under pressure to reduce and tightly manage costs. And for most legal departments, outside counsel spending represents a very large portion of that cost. In addition to enforcing the billing of approved timekeeper hourly rates or alternative fee arrangements, CounselLink has features to manage discount arrangements with law firms. We were curious as to the sorts of discounts used most by CounselLink customers today, and whether any best practices could be gleaned from these arrangements. We will be exploring this question through a series of blog posts.
To start, we took a look at customers leveraging prompt pay discounts. 26% of CounselLink customers take a discount off of some law firm’s invoices if they pay the invoice within a relatively small number of days after receiving the invoice. On average, these customers receive a 5.7% rate of savings on prompt pay invoices, and the overall savings these customers take to their bottom line is 0.27% of their total gross invoices (those with and without prompt pay discounts). While that percentage may be small, looking more closely at how prompt pay is utilized by customers points to multiple ideas for optimizing the savings potential of this discount arrangement.
1. Arrange for prompt pay discounts with as many law firms as possible.
2. Negotiate as large a discount rate as you can.
3. Employ multiple tiers of discounts.
Most common number of days to approve an invoice
Whether you’ve been considering adding prompt pay to your savings toolkit, or already employing the feature, these tips should help you get the most value from this discount arrangement.
Stay tuned for our next post related to other discounting best practices.