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Discounts for early payments of bills are infrequent

The 2006 ACC/Serengeti Managing Outside Counsel Survey gathered some metrics on prompt-payment discounts. Approximately one out of seven law departments received some discount from their law firms for early payment of the firms’ bills. Even that minority, however, receives such discounts from only about one out of five of their law firms.

Those two metrics suggest that about one out of 33 law firms grant a prompt-payment discount (1/7 times 1/5). According to the survey, the average discount is 6.4 percent for payment within an average of 19.7 days.

What remains unknown is whether the remaining law departments don’t try for such a discount, can’t pay promptly enough to persuade law firms to grant the discount, or law firms decline the arrangement (See my posts of June 11, 2007, with four references, and June 20, 2007 on prompt-payment discounts.). After all, firms would have to go back and write down each invoice that ended up discounted because it was paid quickly.