Legal IT Cost Recovery Editorial
June 2005,
A cost recovery solution is much like the percussion section in an orchestra. Pushed to the back, unnoticed, unfashionable yet playing an absolutely critical role. While it does its stuff in the background, other sexier systems jostle for position at the front of the stage, ready to do its solo turn - CRM, knowledge management, deal rooms, email management. But perhaps its low profile is a good thing. It's just goes to show that its part of the fabric, going about its business in an efficient, unfussy way. IT applications should be discreet, after all; an intuitive, reliable system will never impose itself on its users. The downside of such "invisibility" is that from time to time someone has to speak up for it and explain very clearly the benefits of its implementation.
Primarily, it is a matter of profitability. It is patently absurd to try to fill a bucket with water while there is a hole in the bottom. So why focus on fees without keeping an eye on expenses? These days, the expense tracking challenge is more complex than at any time previously. Today, it's not just about copying or even faxing, it's about printing, scanning, mobile phones, even online research. To track, record, process and analyse the millions of charge "transactions" that happen every year - all those documents you print, all those calls you make on the move, all those precedents you look out on the web - means that you have to invest in a powerful, automated, easy to use cost recovery solution. That, or invest in thousands of man hours in the struggle to keep up - with still no guarantee of complete accuracy. Have a system effortlessly track it for you and you can expect to achieve very satisfactory recovery rates, anything between 55%-80% - think about then when your disbursements are rolling into the tens or hundreds of thousands. To put it further into perspective, Copitrak has seen some of its installations deliver a 100% return on investment in just six weeks.
For many firms, laser printing and mobile phone charges represent a new headache. Copitrak research has revealed that many practices are unable even to identify just how many prints they do each year. When given the software to track print numbers, one large practice discovered that they were doing an annual total of 14 million impressions. This huge hidden cost can now be identified and a reasonable proportion recovered. It's the same story with mobile phones. Today's technology can analyse both landline and mobile calls and also has the facility to determine business and personal phone usage ' invaluable for aiding compliance with new VAT rules. Given the upsurge in mobile usage over recent years, it is unthinkable to risk a black hole in your P&L and not record the associated costs.
Cost recovery systems are also an integral part of the management information equation. On one side, we have KPIs and "slice and dice" business intelligence systems putting fee earning performance under the microscope; and on the other, we have cost recovery tools providing equally in depth analysis of cost management. No well-run practice can have one without the other, unless they really fancy the bucket scenario above. A firm needs to know where its costs lie, it needs to know where recovery rates are high, low or exceptional, it needs to identify which teams are on the ball or off the mark, which clients are profitable or where they could be more profitable, in short, a practice has to take a 360 degree view of revenues. For fixed fee work or annual retainers in particular, it is absolutely essential that one has a thorough grasp of overheads to budget for the work accurately.
Any practice that has lengthy experience of cost recovery solutions will tell you that there are "soft" benefits to be enjoyed alongside the obvious. With the proliferation of office peripherals, particularly printers, firms are faced with the very real issue of managing their assets. Walk through any open plan office and you"ll stumble across a printer every ten paces. These can range from your basic black and white laser to your state-of-the-art colour multi-function device but the difficulty arises where there are no hard and fast rules as to what and how much can be printed on a particular unit. People invariably use the printer that is closest to them, not the printer that is most suitable for the job in hand. With comprehensive data on printer usage, firms can quickly establish over utilisation, under utilisation, correct use or abuse, and so ensure that all print jobs are completed more cost-effectively in the future.
One final aspect of cost recovery can have very major implications for client relationships and cash collection - two things close to the heart of law firm management. The ability to manage and recover office related expenses has the implicit advantage of automatically creating a thorough audit trail of disbursements. If a client queries his bill or demands billing transparency, then all expenses can be readily itemised and justified. Detail and openness can go a long way to keeping the clients on side and the cash coming in on time.
Optimising business profitability isn't just down to maximising your billable hours - recording and recovering legitimate overheads has a significant role to play in maintaining and improving the bottom line. That cost recovery solutions work on quietly in the background doesn't mean that we shouldn't occasionally bang the drum for them. Maybe it's time for this must-have technology to take centre stage.
