A new product out today from the legal department management platform LexisNexis CounselLink could change the paradigm for how legal departments pay outside counsel, enabling law firms to receive payments within two days of initial invoice approval, while allowing corporations up to 90 days to more thoroughly review, process and fund the invoices.
CounselLink today is introducing a new version of CounselLink FastTrack, a service that expedites payments to outside counsel while allowing corporations to bolster their balance sheet by holding funds longer.
The service uses an outside bank partner, City National Bank, that pays law firms’ invoices within two days of when they are initially approved after a first-pass review, while allowing corporations up t0 90 days to fund the payment while they review and process the invoice.
While CounselLink previously offered a version of this service on an individual invoice basis, today’s release allows corporations and their firms to set it up for all invoices as part of their ongoing relationship.
FastTrack is modeled on supply chain financing in other industries, but is a first for the legal industry, Dan Ruderman, director, strategic alliances, at LexisNexis, told me during a briefing last week.
No Cost to Law Department
The service costs the corporation nothing. In fact, CounselLink says it actually saves them money by eliminating vendor invoice inquiries and refocusing accounts payable teams on higher-value tasks. Corporations can also earn interest from retained funds and earn credits from CounselLink that can be applied to CounselLink subscriptions or other services.
The law firms that choose to enroll in the program pay a small service fee, in return for which they can receive payments within two business days of invoice approval. This has the potential to improve firms’ cashflow, unlock working capital, and eliminate invoice inquiries, while preserving the firm’s existing banking relationships.
The service fee is calculated as a percentage of the invoice amount, but it is not a set percentage across the board. Rather, the bank will set the fee based on the credit worthiness of the corporation and the length of time it will hold the money. On an invoice of $15,000, the fee would be roughly $450, Ruderman said.
Part of that fee goes to the bank, part to CounselLink, and part back to the corporate customer in the form of a credit that can be applied against CounselLink services.
FastTrack is intended to address problems faced by both corporate counsel and law firms, Ruderman said. For corporate counsel, they are often in a squeeze between wanting to take the time to carefully review invoices while feeling pressure from their internal financial division to keep cash flowing and spending on budget.
For outside firms, they can see their payments locked up in corporate legal for months, sometimes creating large gaps between when the service is rendered and when the payment is received.
“Now the law department can say, we know you want to get paid quickly and we know that we’re a bottleneck in that process, so we’re going to set this up and if you choose to opt into it, you can get paid right away,” Ruderman said.
“At the same time, the general counsel can turn to the CFO and say, I understand that the longer we hold on to cash, the less we have to borrow. To that end, I’ve put all my firms on a fast pay program where we can hold on to our money for a few extra months.”
What happens in those cases when the invoice review finds an issue and the law firm has already been paid?
Ruderman said the initial review will catch many issues, because it includes both automated review using CounselLink’s rules engine and an initial review by the client. But if there is a dispute later about the payment, the company and the firm would work it out either separately or in a subsequent invoice.
Fasttrack will be available to CounselLink customers beginning May 18. There is no cost to enroll.