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The demise of early payment discounts

Back in the day, there was a moderate amount of talk about and acclaim for discounts on law firms bills automatically applied when the company paid quickly. A common combination was about two percent if a bill were paid within a week.

You don’t hear about cost control by prompt payment discounts, and I think I know some of the reasons why. In the first place, law firms routinely grant discounts of five percent or more just for the asking, so the glare of deeper discounts washes out the paltry two percent. Another nail in the coffin has been the difficulty accounts payable has had with compliance; you can promise five days but if the average check cycle is 45 days, good luck. Nor did the interest accrued of the deferred payments prevent early payment discounts from sliding into extremis.

Maybe it became complicated to rush payments and then sometimes have to rewind a part of it, or perhaps general counsel had the sneaking suspicion that promptness led to rubber stamping – any “savings” were wiped out by the lack of invoice review.

Some matter management systems might not smoothly accommodate the billing arrangement. The system can’t know whether the discount was paid on time. All in, it is easier to arrange for a partial retainer bill payment at the start