July 15, 2005
General Counsels Have a Budget Problem
Solving the General Counsel’s Budget Problem
Nat Slavin who writes the "Interactions" section in Corporate Legal Times often hits the mark. Sometimes, it is with a curve ball. His July article is about bid fixing—the increased frequency of general counsels asking law firms to rebid their work to retain the corporation’s future business. Why? It is because the corporate world lives by a budget. Law departments, once exempt from budgetary discipline, are now expected to deliver on target like any other cost center.
That discussion turns into the observation of the root cause for bid fixing. Slavin observes that law firms are failing to address their client’s economic needs.
On average, law firms take 78 days to bill for work performed and another 60 days passes before the client pays for work performed. Under those conditions, law departments cannot realistically budget or forecast future expenditures. In short, law firm fees are eight months behind actual performance of the legal work performed on behalf of the client.
Don’t think your corporate clients place any value on the free cash float. They don’t. In fact, they don’t understand how anyone would do business that way; and second, it often results in a blown budget, putting general counsel in a bad light with the company’s CEO.
Slavin puts it this way, “Until law firms start billing in advance of the legal work they provide, businesspeople will never be able to bridge the gap between budgeting and actual expenses.”
The author points out that law firms should be able to predict 90 days out and bill that amount. It is a risk firms should be willing to take to reduce the tension between the client’s legal department and the company’s CFO.
For the complete article, refer to the July issue of Corporate Legal Times. If you would like to comment or pass along your experiences to the author, e-mail Nat Slavin at nat@cltmag.com.
Pricing pressures in the corporate world may be more about uncertainty than price itself. Solving that problem for the general counsel can reverse recent trends and actually increase realization and per-partner income.
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Filed under Alternative Billing, Cash Flow Issues, Policies/ Procedures by Tom Collins