In more than 20 years of professional services sales, I’ve observed law firms and accounting firms engage in the annual (at least) collections ritual. While we have witnessed an energetic ascendance of the buying class over the last five years, code-named “the new normal,” it occurs to me that buyers have been exerting their power a lot longer than that: Fight the legal bill ex posto facto, or simply don’t pay the bill at all.
Moving from the commercial world to the accounting world more than 20 years ago, I was truly shocked to see the 11th hour bargaining and downward fee adjustments in order to get cash in the door before the books closed on a fiscal year. The willingness of accountants to cut year-end deals trained clients to pay late and to expect bargains.
Still naïve when I moved from the accounting world to the legal world, I was again shocked to learn that many lawyers have — via poor up-front communication and undisciplined financial hygiene — similarly trained clients to pay late (thus transforming law firms into banks) and, when bills were not satisfactory, to demand downward adjustments. In extreme cases, some law firm clients simply refuse to pay. “Why don’t you sue them?” I asked. Silly me. Buyers rule. Always have.
In time-based enterprises like law firms, the effort to parse bills, explain activity and negotiate resolution adds enormously to the cost of doing business, creating the law-firm accounting need to further raise rates and create even higher bills that will buyers will discount even more or leave unpaid. It creates tension between firm management and billing lawyers. And, it leads to ill-will between buyers and providers. This is no way to run a railroad.
In light of all of this, the transition to fixed-fee legal services pricing is obvious and well-underway, notwithstanding the obvious differences between statutory auditing and legal services. Also obvious: buyers have been in the driver’s seat for a long while. It’s just that the new normal has “outed” the reality.