In-House Counsel

The back-office (and often hidden) costs of paying law firms

By Rees Morrison

Several posts have zeroed in on aspects of the logistics of paying law firms (See my posts of March 26, 2008: Six Sigma and invoice processing; and March 2, 2008: invoice review and 25 references cited.).

A handful have suggested what costs are incurred by law departments when paying firms (See my posts of Sept. 14, 2005; June 16, 2006; and May 1, 2006: time spent on invoice review.), which is easier to manage if the bills come in a pre-defined format (See my post of Nov. 21, 2007.) and if fewer people are involved (See my post of Nov. 10, 2007: a three-way approval process.). One law department even took steps to reduce the number of payee sources (See my post of April 6, 2008: from 400 to 40 sources.).

At another company, the cost on the accounting side has been about $10 per invoice, even with electronic billing. With that cost structure, if a law department has 200 matters pending, each billed monthly by a law firm, then the company?s accounts-payable processing runs around $2,000 a month (See my posts of Nov. 5, 2006: costs of processing invoices.).

The same company estimates that the cost to process an invoice that comes in other than electronically is twice as much, about $20 per invoice (See my posts of Sept. 14, 2005: invoice inflow; and April 9, 2008: transmission of approved invoices to accounts payable.).

It would be great if readers would send me any corroborating data on the A/P costs of paying invoices. I would like to check the representativeness of these $10 and $20 figures.

Full post as published by Law Department Management on May 18, 2008 (boomark / email).