Accounting complexities with e-billing fees paid for by firms

I offer this post in hopes that a reader can respond with a better solution to a problem.

A major financial company pays an ASP for its e-billing function. Typically, law departments pay a commission-based fee borne by outside counsel; two percent of the invoice amount is the norm.

An IT person at one such company wrote me recently. Because the typical commission would have been exorbitant, the company negotiated a set fee with the ASP. The law department collects and remits this fee to the ASP. The ASP is fine with this since it gets more money up front and the client collects and remits the fee, limiting the ASP’s accounts receivable overhead and hassle. The writer pointed out that at least four other financial companies, as well a major retailer and a large pharmaceutical company, have a similar arrangement.

To pay the ASP its fee, the law department redirects a set amount from the first bill of each of its law firms. “This method, multiplied by the huge number of law firms, creates a hole in our AP reporting on the 1099. This hole is patched by a manual adjustment, which has been flagged by Internal Audit and is not well received by the Controllers. Regulatory requirements, which have pushed deep down into financial controls, also are pressuring us to change the approach.”

What is a better way for all parties involved for a law department to collect e-billing costs from law firms?