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

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.

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