In today's business environment, higher interest rates translate into slower collection and pricier loans. Business owners need to look for other ways to protect their cash flow. Cost-cutting programs help, and for many companies it's fruitful to focus first on legal expenditures.
Lynda Graham Mays, the president of Longwood, Fla., consulting firm Ogilvy Management Services, offers four valuable suggestions for growing companies looking to keep their legal bills under control:
1. Insist that each bill specify the start and end dates for itemized services. "Without that information," Mays warns, "it's very difficult to audit -- and to control -- the cost of any particular legal project."
Here's her analogy: "Think of how difficult it would be to understand your Visa bill if it came each month but regularly included costs that had been incurred months earlier. You wouldn't be able to tell how much you were actually spending monthly. And that's what company managers need to know if they're going to go out and compare the costs of services from different law firms."
2. Require distinct identification of every person mentioned in your bill. "Let's say two lawyers working on your company's lawsuit had dinner with Sam Smith," suggests Mays. "If you knew that Smith was a hostile witness, or the opposing counsel, or simply an old friend and 'adviser,' you could ask some relevant questions, like 'Why did you have to go out to dinner? Why did two lawyers need to go? Couldn't you have covered the same subjects in a 15-minute telephone call?"
To business owners who recoil at the thought of endless detail cluttering their monthly bills, Mays responds, "Companies that take control of their legal relationship by requiring more of this kind of information force law firms to be more accountable."
3. Scrutinize in-house conferences that may unnecessarily pad your legal bill. "Sometimes junior attorneys are assigned to work on a company's case so they can gain experience," explains Mays. "The client winds up paying for what really amounts to training time." You should demand information adequate to determine whose involvement was really worth paying for.
4. Negotiate a money-back guarantee, meaning "the right to audit any bill for up to six months," advises Mays. You may demand a written guarantee that your law firm will return all fees that you can prove were unnecessary or excessive.* * *
For more savvy tips that can help you reduce your company's legal expenditures, see "How the Right Kind of Bill Can Control Your Legal Costs" (Finance, February 1995, [Article link]) and "Keeping Costs Under Control" (Finance, March 1995, [Article link]). Both are part of this column's continuing series on cost-cutting strategies.