Published on: 6 May 2022 | Financial Bulletin
In the post-COVID business environment, the resilience of IP firms will be dependent on a firm’s ability to be lean, agile, and flexible, while still providing a high-quality service.
Law firm business leaders have had transformation on the agenda with a whopping 94% confirming they would “definitely” or “probably” consider “greater use of technology to cut costs”.
The many facets of relevant technology include, for example, pricing tools, the automation of routine tasks, means of communication with clients, data management, collaboration platforms, docketing and billing systems, as well as practice enhancement tools such as case law research, smart document drafting, and predictive AI.
The expectations are that these new technologies are poised to generate seismic changes in how the practice of IP law will develop in the future and with respect to how firms communicate, work, collaborate, and engage with courts and IP offices.
Operational inefficiencies amplified by Covid
Long before the disruption and devastation caused by COVID-19, IP firms were dealing with a range of operational inefficiencies relating to the cost and complexity of managing the payments and being paid by foreign agents from around the world.
Specifically, relating to cashflow efficiency, exorbitant bank fees, operational efficiency, and currency risk. Over the last year the impact of these challenges has only been amplified. And whether you’re a large or small IP firm the impact is the same.
For an industry focused on serving the world’s innovators, it’s astonishing to realise the costs and inefficiencies related to foreign agent payments that IP firms have been putting up with for decades.
IP firms have traditionally been slow to adopt innovative solutions when it comes to financial and accounting systems and processes. This is compounded by the complicated accounting, data capture and reconciliation requirements and the use of inflexible tools that were invented in the ‘90s.
At an industry level we estimate that the exchange of international IP work between firms and attorneys is worth over US$18 billion every year.
Using the Billtrader savings calculator, we estimate that bank fees alone cost the IP industry over $50,000,000 every year and the staff cost for the manual administration involved is even higher.
Cashflow efficiency – prior to the impact of COVID on the global economy it was very common to wait three to six months to get paid by overseas agents. This led to many firms regularly holding up to half of their annual revenue in unpaid bills. This creates cashflow headaches and is not sustainable in the current environment, especially for firms in countries that are net-receivers of work.
Exorbitant bank fees – the IP industry is powered by the global exchange of work between attorneys and IP firms. One of the biggest challenges is the cost of making payments and getting paid. When you need to pay a bill from your foreign agent, your local bank charges a fee for each international transaction. At the receiving end, your foreign agent’s bank also takes a fee from the payment, leaving your agent with a shortfall.
Operational efficiency – in addition to the exorbitant bank fees, another factor that eats into firm profits is the sheer administrative burden of manually entering the volume of invoices from multiple countries and then interacting with the payment provider to make all the payments and then reconcile the payments against each client account. The data entry and reconciliation are manual tasks that are commonly done by junior members of the accounts department, but the cost of these resources add up. As these roles are not generating revenue, their salaries are direct costs to the profit of the business.
Currency risk – the IP industry exchanges billions of dollars in foreign currency every year and very inefficiently, using outdated technology and the impact to firm profitability can be significant. For most IP firms, at least half of their annual revenue has an FX component to it. And the impact of this volatility is not always visible to partners.
A fintech solution purpose built for IP firms
For many industry sectors financial technology (FinTech) solutions have been game changing in reducing costs and maximising efficiency. For niche industries, such as IP, that have specific and unique requirements have been ignored by big technology companies for decades, and the generic solutions don’t fit their specific requirements.
These challenges led me to the creation of Billtrader, a niche fintech solution that was purpose-built for IP firms – designed to solve the cost and efficiency challenges related to making payments and being paid by foreign agents.
The FinTech innovation is delivered in the following key areas:
1. Eliminate bank fees on international payments and receivables
Because we have bank accounts around the world, we can eliminate international wire transfers. A firm in the UK can pay us into our bank account in London and we’ll pay their colleague in the US, from a US account, without funds travelling across the pond. The system we’ve built matches the payments across the globe, eliminating the need for expensive wire transfers. Because of the FinTech innovations we’ve adapted and customised for the IP industry, we can virtually eliminate international bank fees.
2. Improve cashflow efficiency
We use best-of-breed supply chain finance solutions to allow us to pay IP firms right away. Instead of waiting 3 or 4 months to be paid, firms can get instant credit for their outstanding bills. They can use that credit to pay any foreign agent’s bill, thus freeing up their cash.
3. Maximise the deployment of accounting staff resources
We’ve adapted the latest data capture tools and artificial intelligence to digitally capture all the information from foreign agent bills, and to push that information seamlessly into any accounting system. The Billtrader solution eliminates the need for manual data entry, saving time and staff costs.
4. Integrate with your accounting software to maximise efficiency
IP firms can choose to integrate the Billtrader platform into their accounting software, thereby removing the need for manual data entry, manual authorisation of international payments, preparing and sending remittance advices, manually tracking invoice payments and manual adjustments for bank fees and currency changes. Integrations available with all major IP management systems including Inprotech, ProLaw, Aderant Expert, Xero, Equinox, Patricia and many more.
5. Outsource foreign exchange to the experts
Billtrader uses FinTech to generate forward currency rates, which allows us to give an IP firm the guaranteed price it needs to pay in multiple currency rates. We take the guesswork out of the amount firms need to charge their local clients and protect them from coming up short.
The outlook for 2022
The thing we have learned from the last two years is that disruption is the new normal. Operational transformation will be a priority for IP firms looking for ways to create lean and agile businesses built to adapt to future disruptions.
Those firms that have already embraced the latest FinTech capabilities along with lean, agile operating models should be feeling very optimistic about the year ahead and beyond.
Get in touch to schedule an obligation-free Operational Efficiency Assessment and platform demo
To learn more about how Billtrader can help you transform your foreign agent payments and receivables contact our global sales team.