Matthew Homann makes a great point in the[non]billable hour about law firm client cost recovery. He mentions a presentation at the upcoming LegalTech that will cover many items to charge back to clients:
Effective cost recovery systems must manage these billable charges – everything from Internet research to printer, fax, phone and copier activity – from the minute they’re incurred all the way through billing and reimbursement.
Mr. Homann understands what clients are really buying, and charges accordingly.
When I open a statement, I look at what legal services were rendered and the charge. I then make an assessment of how much I value the services, and glance at “disbursements” to see if they seem proportional. If services or disbursement charges appear excessive, I call and ask for an explanation.
As a general counsel, I understand that law firms are businesses. I also understand they are entitled to prompt payment for appropriate services rendered. And I generally agree that I should pay for some costs associated with doing business.
But when many law firms are charging $300 per hour (or more!) for services rendered, the invoicing for some disbursements (like above-market long distance charges, for example) reinforces a long-held concern: law firms, under the current hourly billing model, have no incentive to control costs save a strong sense of professional responsibility.
While this concern can be aggravated by many things, is a fax charge really worth it?
Law firms that understand their costs dollar-for-dollar reduce my company’s bottom line and clearly act consistent with that understanding will get my work in the future. Firms that don’t are just living off goodwill earned years ago and are basically spending their associates’ inheritance.
Ron Friedmann notes that General Electric is expanding its use of auctions to purchase legal services. I would bet the RFP governing the auction terms includes some flat rate or other control on disbursements.
When I noted earlier that I call and ask for an explanation of charges, that isn’t always true.
I may just make a mental note, and not refer additional work to the firm.