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Benchmarking Data Shows Opportunities Still Can Be Gained from Cost Recovery

John GilbertIn early 2013, nQueue embarked on a project to better understand and share its customers’ cost recovery strategies. While there have been a number of industry surveys over the years on expense data capture, we chose instead to study actual law firm capture and billing rates. By analyzing what firms actually do—rather than what they say they do—we are to provide detailed and accurate benchmarking data. The result is nQueue’s Cost Recovery Data Capture and Rate Report

Demographics

We pulled data from 152 different law firms worldwide: 55.3% have more than 200 users; 28.3% have between 71 and 200 users and the remaining 16.4% have less than 70 users. All firms studied capture basic photocopy information. While we are not able to see what happens after capture data reaches the firms’ time and billing systems (for example, we are not able to track instances where partners choose to write off photocopy charges), we are able to see the rates firms are charging their clients. In the case of basic photocopies (black-and-white copies at firms that differentiate) the median rate charged is $0.17 per copy. Almost all firms (90%) charge between 10 and 35 cents per copy.

Some firms are missing opportunities, however, from color copies. While more than 80% of firms differentiate between color and black-and-white copying, the remaining firms are leaving money on the table. The median rate charged for color copies is $0.60 per copy, a 330% increase over the charge for black-and-white.

The Rise of Print

As technology has evolved, so has the way that firms create documents. A few years ago, it was most common for an attorney or other user to print a single document and duplicate it by making photocopies. Today, however, firms use multi-function devices (MFDs) to both print and copy. There is no advantage to “print-one copy-many” and people simply print the quantity they need. 

Ten years ago, firms were on average making 7 copies for each print; today they are making 1.5 prints for every copy. As such, it is crucial to capture and recover for prints, and most firms are doing so. More than 76% of firms are capturing print information and charging at an average of $0.18, similar to the rates charged for copies.

Fewer firms, however, are differentiating between color and black-and-white printing and this is costing them money. Only about 45% capture the data needed to tell the difference. Firms that do differentiate are charging an average of 50 cents per color print, about 2.7 times as much as they charge for black and white.

Perhaps the biggest opportunity out there is from scanning. Firms have real costs associated with scanning, including storage, software and device costs, so it is defensible to charge for scanning. However, only about 44% of firms do. 

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Capture. Process. Act.

Not recovering chargeable costs is called “financial leakage” and it has an adverse impact on profitability. And not capturing the information not only precludes the opportunity to recover, but it also limits the opportunity to make good decisions. Anyone who’s seen the movie Moneyball, reads Nate Silver’s FiveThirtyEight blog, or even taken place in an Oscar® pool understand the value of data to inform better decisions.

The optimum strategy is to capture all possible expense related information. In addition to prints, copies and scans, capture expenses related to fax, phone, postage, shipping, and research. [All of which is covered in the full version of the Cost Recovery Data Capture and Rate Report.]  In many cases, these expenses can be directly billed to clients and in other cases the data can be used to build goodwill with clients because you are not charging. 

Once all data is captured, it should also be processed into information that can be acted upon. For example, certain clients may be generating revenue, but in order to understand how profitable they are (unrecovered) disbursements must be taken into account. Many clients are asking for alternative fee arrangements, and they can be a big marketing advantage for the firm. But they cannot be properly priced without full cost-related information. From an operational standpoint, is the firm using the right number of devices? Are they configured and located appropriately? Are the right projects being sent to facilities management providers? These are the types of questions that can be answered with complete capture of expense information, even costs that cannot be recovered. 

The “New Normal” at law firms requires a more client-centric approach than firms have taken in the past. Some say this is incongruous with cost recovery: some are out there saying that “cost recovery is dying.” But the data garnered from the Cost Recovery Data Capture and Rate Report tells a different story. Cost recovery is still vibrant and an important element in firms’ profitability quotient. And there is opportunity for more, both in terms of additional recoveries as well as the value that can be created from leveraging the information that can be captured in the process.  

Those interested in a more detailed look at the Cost Recovery Data Capture and Rate Report may request such information by emailing the author at This email address is being protected from spambots. You need JavaScript enabled to view it.

John Gilbert is Senior Vice President at nQueue, a provider of cost recovery and document scanning and routing solutions worldwide.
 

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