We've all heard and experienced the hub-bub about Alternative Fee Arrangements. You can read more about our thoughts and work with customers relating to AFAs in other posts in this blog.
The reality, though, is that most law firms are still reliant upon and use billing rates for the majority of their matters. Seems like old hat, nothing changed...but that's simply not true. Even if you are still billing hourly, you can't escape the impact of the new industry expectations for legal services costs. Maybe your firm has experienced the situation...
The new rates memo goes out, and things seem fairly quiet. And then...first year billing time hits. You send out the proformas for attorney review reflecting the new rates, and low and behold the accounting team is FLOODED with Rate Exception requests.
These have to be worked out, negotiations accomplished and bills updated and reviewed (AGAIN) before you can even get the bill out to the customer.
And, in addition, lack of oversight of these negotiated rates may mean your firm is 'giving away' more than you realize until it's too late!
Poor Rate Exception Management Leads to Decayed Profitability and More
- Delayed revenue recognition
- Decelerated cash flow
- Perturbed partners
- Overloaded accounting team
- A very unhappy CFO and Managing Partner
None of the above is what you're looking for when you are trying to get paid for services rendered.
The fix - coordinate the management of rate exception requests as part of your daily, and annual, business processes. Implement a concerted and pre-emptive annual annual Rate Exceptions review and approval process. And, of course, done right, the work you do here should be also applicable to managing rate exceptions on an ad hoc basis (one-offs that happen during the running of the matter) and as part of your New Business Intake process. Remember - it's about LIFECYCLE MANAGEMENT, not about fixing one process in a vacuum.
Now that's how to keep your cash flow going while protecting profitability! Read more about Protecting Law Firm Profitability in our FREE whitepaper.