A press release by Celent [www.celent.com/PressReleases/20031229(2)/ClaimsLitigation.htm] noted “typical savings” from electronic invoice processing: “2-5% of total invoiced initially, 8-10% after tuning of rules.” For this posting, I have no view on those savings estimates, but I do wonder whether a law department can claim whatever savings are identified on out into the future.
What if in year one, with a rules-based e-billing package, a law department spots and disallows eight percent of the total amount of law firm invoices it receives? What if the firms that billed improperly or excessively corrected all the disallowed practices in year two – and the total invoice payments stayed flat, i.e., 8 percent below the first year’s original invoices’ total amount? Is it legitimate to claim a savings of 8 percent for year two? The net present value of savings extrapolated into the future at 8 percent of billings would be impressive, but a dubious reality. [See my post on April 14, 2005 about European firms and e-billing.]
Beyond this one hypothetical, what is a reasonable way to calculate savings from a practice (think budgeting, ECA, naming staff, holding rates constant) if law firms change their behavior to comply with the practice?