Kris Satkunas; Strategic Consulting Director, and Stephanie Beck; CounselLink Professional Services Manager, LexisNexis:
In our last post, we reported on the use of prompt pay discounts by CounselLink customers. We found that 26% of customers take a prompt pay discount with at least one of their law firms, and we made 3 recommendations:
We decided to explore prompt pay discounts for this post from the law firm perspective, i.e. which firms are accepting prompt pay discount arrangements with their customers, and are there greater opportunities with some than others? We found that 39.8% of firms billing through CounselLink have received a prompt pay discount from at least one of their customers. Note that we excluded very small law firms from our sample to focus on firms headquartered in the US with a regional, national, or international presence.
As we analyzed the data further, it became evident that that more of the larger law firms are receiving prompt pay discounts than smaller law firms. This makes sense if you think about it. We know from the research we do every year for the CounselLink Trends report that the largest firms are responsible for the largest portion of legal billings, and that their share of total legal spend has been increasing as a result of the trend toward consolidating to fewer law firms. Therefore the largest firms would be the most important ones to go to when negotiating discounts in order to maximize the savings opportunity. Here’s how it breaks down:
Very Large Firms (more than 500 lawyers -- roughly the largest 100 firms):
Large Firms (between 200 and 500 lawyers – roughly the next 100 firms):
Medium Firms (between 100 and 200 lawyers):
Small Firms (between 50 and 100 lawyers):
We also took a look at firms not based in the US and found a small percentage of them (5%) receiving prompt pay discounts. And there are even a handful of non-law firm vendors set up with these arrangements. It goes to show that some customers are really taking advantage of the cost savings tools available to them.
What the data doesn’t tell us is the reason some firms are not participating in prompt pay discounts. We suspect it’s not that they’ve refused, but with only 26% of customers taking advantage of prompt pay discounts, that they simply haven’t been asked. We also noticed that the vast majority of firms accepting prompt pay discounts only do so with a handful of customers. Clearly these firms are open to prompt pay discounts but again, perhaps they simply weren’t asked by the majority of their clients.
If you’re thinking about expanding your use of these types of discount arrangements or just getting started, take note of the numbers above that demonstrate vendors of all shapes and sizes are willing to engage in them. This is a real opportunity to achieve some cost savings. Just ask.