Circuit City promises prompt payment – can they do more?

By contributing author Brad Blickstein, Blickstein Group, on legal service providers:

As did many people (including Rees, who’s quoted in the article), I read with great interest the June 2007 Corporate Counsel article on Circuit City’s prompt payment plan, in which they outline their policy of requiring a 3% discount on all legal fees, based on the fact that they pay in 20 to 30 days.

It’s my guess that they’re still leaving money on the table, at least until they implement the e-billing program that they are “currently in the process of implementing.”

First, a legal assistant is reviewing each bill “line by line to make sure all charges comply with company guidelines.” Anyone who’s ever done this will tell you it’s mind-numbing work. I can almost guarantee that an automatic system would be more accurate, especially with the company-imposed pressure to work quickly. Moreover, the legal assistant and “the attorney responsible for the matter (who) is expected to give the bill a thorough going-over” are doing so at the expense of legal work. Any work the attorney is not doing while approving bills is going right back to the law firm–at an average cost of $343 per hour (per the latest Hildebrandt Law Department Spending Survey.)

Rees sums up nicely, “The real way to manage outside counsel costs is by what you ask a law firm to do and who does it–and how closely you watch both.” But an often-overlooked key is using efficient tools to do the watching.