If cost control is a priority for your company, don't ignore your legal expenditures. Many legal bills are riddled with excessively costly or unnecessary charges, warns William Gwire. Gwire, a San Francisco lawyer, helps companies audit -- and control -- their legal expenses. "Smaller companies are especially vulnerable to overbilling," he warns, "because they usually don't have an in-house counsel who is a guardian of the gate, evaluating the legitimacy of each expense."
Why do corporate clients so often get overcharged? Gwire blames the legal profession: "Lawyers are under tremendous pressure to bill. They've usually got quotas set for billable hours, and their compensation is tied to how much they bill clients. The pressure to pad time -- and bills -- is omnipresent, even for honest lawyers."
How can you minimize the chance of being overcharged? Gwire urges companies to require their outside law firms to provide detailed monthly bills like the one illustrated below. "The more information you get, the less likely it is that extra charges will just slip in without your noticing. Also, if you ever decide to perform a legal audit, a bill like this one makes it simple for an expert to detect a pattern of overcharging and win you financial relief."
· This bill details every charge, as opposed to the common practice of lumping various tasks together. That kind of "block billing" makes it simple to pad a client's bill, and nobody knows exactly how much time any task has taken. If your law firm won't unblock its bill, switch firms.
· The more details you have about how much time any task -- even a small one -- takes, the better chance your auditor will be able to detect overcharges.
· A big source of overcharging is related to staffing, so you need to know exactly who's doing what work. If new names keep appearing on your bill, the service can't be cost-efficient. Legal auditors can use the information to tell if tasks are being allocated with cost controls in mind.
· Overcharges are often buried in reproduction or fax charges, so it's essential to require a complete breakdown. Don't let your lawyer get away with a 25¢-per-page fee when the copy place down the street charges 5¢.
· Most legal bills omit the provider summary, but it can help you see exactly how you're being charged, the same way unblocked service charges do. Detail reduces the potential for camouflaged overcharges.
· The updated monthly total lets you quickly compare your actual legal costs with your law firm's projected budget. Remember: often problems aren't apparent on your monthly bill -- it's the accumulation of overcharges that turns a $15,000 projection into $50,000 worth of bills.