Many large corporations - your firm's
"blue-chip" clients - have developed strict guidelines for the types
of charges they will accept. Currently, the law
firm is absorbing the carrying costs for paying hard disbursements
and the client is getting a "free ride". Why would they
go along with the DMA Solution?
Fact:
Virtually every one of the AmLaw 100 Law Firms carries
substantial hard disbursement balances for
clients.
Fact:
The “Float” on out-of-pocket costs advanced by
the law firm starts on the date the firm check is written - not
on the date the client is billed - and does not stop until
the date the client's payment check is received within the
firm. Therefore, the
hard disbursement float can average up to 30 days longer than the
firm’s accounts receivable average.
Fact:
Until recently, these firms had no place
to recoup these carrying costs, other than considering it as part of
the firm's overhead and therefore placing the costs in the billing
rates. Therefore, the
blue-chip client who paid his/her bills (including hard
disbursements) within 30 days was subsidizing the
firm's slow-paying clients,
and clients who used substantial amounts of
hard disbursements.
Fact:
Law Firms do not raise billing rates for all clients to
recoup the costs of making photocopies. Instead, virtually all law
firms now use capture devices and systems such as Equitrac, CopyTrac
and BillBack to track copying costs and allocate
those costs directly to the correct client and matter.
The DMA Premise: If hard disbursement
carrying costs can be accurately, equitably and ethically charged to
the client whose matter caused the
out-of-pocket expenditure of funds, then it is unfair to the other clients not to charge that
cost to the correct client.
The DMA Solution: Effective immediately, offer each client three choices regarding
the payment of any hard disbursements:
1) Pay the firm’s invoices, including fees and disbursements,
within a reasonable time.
2)
Provide the
law firm with an evergreen retainer for each
matter.
3)
Elect to use the outsourced third-party
vendor's Disbursement ManagerTM Solution.
The cost to clients who
choose to use the DMA Solution: Heavy users of hard disbursements - such
as intellectual property clients - will see less
than a 1% increase in their total invoice. General Practice clients will see
less than 1/4th of 1% increase in their
total invoices for the year.
The cost to the client is
minimal.
The cost to your firm's
blue-chip clients: No cost at all! Most of your
great clients pay their legal bills on time already -
many within 30 days or less. Therefore, there
would be no carrying costs to those clients who choose Option
1.
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