By Michael F. Cade, CPA, CGMA

As our roles in business and industry continue to evolve, CPAs are being called upon to tackle a broader range of responsibilities. In some small and midsize companies, this can include overseeing and managing legal costs. The effort can be a significant challenge, but it is also an opportunity to apply your CPA-related skills and add value to your organization.

Just as you wouldn’t want a lawyer running your general ledger, I am not suggesting that CPAs should embark on the practice of law. However, there are a number of activities done by lawyers that CPAs can accomplish successfully with proper training.

This blog examines ways to minimize and, in some cases, avoid legal costs. In a second blog that continues with this theme, I will discuss situations that need to be handled formally by a lawyer and methods for controlling costs when dealing with a legal firm.

Four Ways to Manage Legal Costs

Standard Agreements – The bulk of contracts and agreements for most smaller companies have little variation and fall within general categories. These include service, rental, or purchase agreements, as well as nondisclosure, financing, and employment agreements. They are commonplace and support the daily operations of the business.

Review the agreements entered into on a recurring basis at your company. If you engage a lawyer to help negotiate or complete those agreements, you may be able to save costs by establishing standard agreements, often called boilerplates. These are templates that include all of the normal legal language needed to complete a transaction. When you need an agreement, start with the standard agreement and add in specifics as needed.

By working from a standard agreement, you can avoid the cost of engaging a lawyer for every transaction. However, it is a good practice to have a lawyer review the standard agreement periodically to update it regarding any changes in regulations or common practice.

Standardized Terms – If you use standard agreements, you will occasionally need to deal with parties that want to alter the agreement. To avoid additional legal costs, you need to be ready for this eventuality. As you review your company’s most common agreements with your lawyer, define the key terms in each type of agreement, such as service levels, payment timing, or term. Identify those terms that tend to be negotiated, and establish a range of acceptable values for each.

For example, if your company’s standard payment terms are net 30, and a customer wants net 45, then net 45 is a nonstandard term. You do not need a lawyer to help you decide if 45 days is acceptable since it is a management decision. If you have a range preset, you will be able to address nonstandard terms easily without incurring more legal cost.

Negotiations – If broader negotiations on agreements are needed, embrace the fact that, as an organization’s CPA, you have an unparalleled understanding of the financial impact of the choices associated with contract terms. Be confident in negotiating these terms on behalf of the business. However, if there are terms or clauses you are not comfortable negotiating, then engage focused legal help in those areas. In most cases with smaller companies, it is not necessary for lawyers to negotiate contracts on your behalf.

Embedded Resources – Review other consulting and service agreements for forms of legal support embedded in the agreements to which you are entitled. For example, if you have an employee benefits consultant, the provider may have benefit-related legal support as part of their service agreement. Don’t pay extra for something that is included in a service offering for which you are already paying.

Bottom Line – As a CPA in business and industry, you can add value to your organization by managing legal costs. To do this, consider taking on repetitive legal-related tasks within pre-established parameters. Take an inventory of your current legal costs, and look for opportunities to create standard agreements or boilerplates. Build a set of standard terms, and gain an understanding of the impact of nonstandard terms so you can be an effective negotiator. Lastly, review other service agreements for embedded legal support as a means of avoiding additional expenses.

Part two of this blog focuses on those times when outside legal help is required and how you can manage those costs.

Michael F. Cade, CPA, CGMA is a strategy consultant and executive coach for MFCCoach LLC in Morrisville. He is a member of the Pennsylvania CPA Journal Editorial Board and PICPA’s Corporate Finance Advisory Board. He can be reached at mfcade@nfpbeyondthenumbers.com.

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