While there is no doubt that larger clients have been taking a stronger stance against cost recovery, there has been an increase in internal write-offs by 18% and, for charges that do make it to the invoice, there has only been a decline of 4% over the past decade+.
Is 40% percent of something better than 0%? In regards to cost recovery, most people would say “yes”. For copies, prints and scans, if your recovery percentages are at industry standards/benchmarks, your actual costs are in line and the recovery rates you are using are acceptable, you are probably recovering in the 35% to 45% range.
For most firms, in regards to their telephone, postage, and facsimile charges, chances are that the volume and/or costs to collect and process the data do not warrant further recovery. If you are recovering, and the internal cost of management and the collection system do not exceed your recoveries, let it ride.
For litigation support and eDiscovery services, many firms are struggling to develop a model that captures and recovers accurately this exploding data storage area. Some of the hurdles are:
- The fact that the infrastructure and software costs have historically been an in-house cost that was not recovered
- A strong reluctance by attorneys to start to bill for this area that in the past was considered “free”
- The hybrid nature of this area with a combination of in-house and outsourced costs
In regards to legal research (the most attacked area of cost recovery), do you forego this recovery stream or continue to collect the 10% to 15% net realization that most firms collect?
When it comes to optimizing your firm’s recovery strategy, there are a lot of questions—but one basic place to start: recognition that a clearly defined, defensible strategy has shown stable returns, during and since the economic downturn. Let’s talk.