Many law departments have toyed with improvements to their billing processing that allow them to pay invoices quickly. In return for receiving payment within five days, or some other time shorter than the customary 30-45 days, law firms supposedly discount their fees by two, three or four percent.
Other than during a firm’s end-of-year paroxysm of collecting all it can, quick payment means relatively little to firms. They grant the discount to keep the client, not because they make it up on the interest from the quicker-arriving funds. And this leaves to one side the obvious fact that prompt payment discounts do not change the economic forces driving a law firm’s billing amounts. [See my April 18, 2005 post on law firm compensation systems.]