Spend management is usually associated with ferreting out the hidden costs of physical goods such as desks, chairs, paper and pens. But the discipline can also be used to control the costs of professional services-such as legal fees.
Legal bills can be complex, especially for companies that get hundreds of them per month; technology from DataCert roots out those unexpected or unauthorized items that can pad those bills but are easily overlooked when reviewed manually.
"Law firms have lots of data that deals with the kind of work they are doing and what they charge for each task they perform and how they perform it. And their clients, on the other hand, are left with nothing but slips of paper," says Jeff Hodge, a senior director at DataCert, whose invoice management system tracks and itemizes legal invoices for corporations.
The technology, which counts Barclays, AOL and about four-dozen other Fortune 500 firms among its clients, processes bills from more than 2,700 law firms around the world; the goal is to make sure those bills are exactly in line with why, and under what conditions, the corporation hired the lawyer in the first place.
"A lot of our clients are doing as much as $800 million in legal spend per year," Hodge says. "You can't analyze that manually. But with a click you can electronically analyze a bill, understand where the costs came from, and take corrective actions."
The savings can really add up. Hodge says AOL has billed $33.8 million through the DataCert platform, and adjusted $4.35 million out of those bills (AOL didn't return calls). Hodge also says AOL negotiated $1.9 million in discounts with law firms. "That's money that would have gotten paid in the past."
Andrew Dey, head of operations, legal and compliance for Barclays, says this bill analysis also proves useful in comparison shopping among law firms. If Barclay's is billed £25,000 by a law firm, for instance, it can determine not only what that law firm did for the money, but whether Barclays could have hired another law firm at a better price. "We will be able to compare one firm against another, and look at areas that each firm worked on," Dey says.
When using the invoice management system, legal bills are routed to the proper department for approval based on pre-established conditions, such as whether the law firm was authorized to do a specific type of work, and to see if the math on the bill adds up. A general analysis of how different law firms handle and charge for similar types of legal work is also done. Invoices are then either approved or sent back to the law firm.
"The product performs business rule validations, such as determining whether the law firm is charging in excess of an agreed upon hourly rate, or if they've charged for unauthorized business travel or unauthorized rates for research," Hodge says. "It can be as complex as a law firm sending two people to a deposition and charging time for both when the company has authorized only one lawyer. We can check an invoice on any of that."
Additionally, all of the legal transactions are logged, so an institution can study what kinds of legal work it's had done, which law firms it hired, and how it was billed.
