Document Assembly – Return on Investment

Document assembly is an efficiency and quality control tool. Time spent on a document and the quality of the document are often perceived to have a direct correlation. The more time you spend on a document, the better the quality of the document. Document assembly can be cost-justified when you need to achieve a certain level of consistent quality, but your clients are NOT willing to pay for the time to achieve that level of quality. It is then that you need to look at efficiency tools which preserve the quality while decreasing the time expended to achieve that level of quality.

There are two reasons attorneys begin to explore document assembly. The primary reason is usually: “Help. I’m losing money on these transactions because my client is unwilling to pay my bill”.

The more apt reason should be: “Wow! I could make a fortune if I automated these transactional documents, and charged my clients a flat fee or minimum fee”. Document assembly systems have reduced drafting time for some documents by 1000-fold, and produced drafts that were error-free.

Document assembly is cost-justified if you find yourself specializing in a particular area of law or type of transaction, and hope to increase your profit margin. View it as an investment in your clients. You put time up front (which may or may not be billable). And in return, the volume of transactions you can handle and the profit margin on those transactions will increase.

Assessing R.O.I. on Document Automation

You should assess the potential profit margin on each category of documents you choose to automate. In a corporation, this is an easy job. When you are paying employees a salary or bringing work in-house, the formula is simple: (hours saved from automation * hourly salary) OR (outside counsel legal fees saved) over a designated period versus cost of automation. The cost of automation includes the costs of the software, employee development time and any outside consulting fees. As a rule of thumb, you should get a complete return on your investment within six months of completion of the automation project.

R.O.I. for High Volume/Low Profit Margin Documents

With high volume/low profit margin documents, document assembly captures revenue by making existing employees more productive and minimizing time spent on marginally profitable activities. The return on investment (“ROI”) in high volume/low profit margin documents will likely cover the costs spent in purchasing the software and creating the template. Only with high volumes, however, will such investments be cost-justified.

In several practice areas, documents can be found that would benefit from template automation. To select such documents, the firm should evaluate its document flow and determine both the number of similar documents created each month, as well as the average time spent generating such documents.

In assessing the “generation time”, you should include time spent on negotiation and redrafting, as well as original mark-up and word-processing. Examine and assess the full life-cycle of each document. This is because expert drafting systems save time both in the creation of the “first draft” as well as reducing the number of changes between the first draft and the “final draft”.

In assessing the “number of similar documents”, similarity should be viewed loosely. Some documents, such as bankruptcy forms are very specific and need to be viewed individually. Other documents, such as court notices, are more generic and should be aggregated. The power of document assembly software lies in the ability to merge several documents into a single template which is easier to maintain and update. We can take 20 forms of debt instrument and merge them into a single template that addresses every type of debt instrument imaginable, including some combinations which are not imaginable.

R.O.I. For Low Volume/High Profit Margin Documents

Often overlooked in the discussion of document automation are what I call low volume/high profit margin documents. Many real estate, banking, merger and acquisition, and corporate documents fall into such categories. These documents form the bread and butter of many law firm practices. Specialists in these departments repeatedly pull up prior deal documents, carefully mark them up, and release them to their clients for large sums of money.

These documents are characterized by their length and complexity. They often run over 100 pages with multiple exhibits and addenda. They involve families of inter-related documents and schedules. They may draw on client specific data to be pulled from a matter management system or even a deal-specific database. The documents often contain arcane language that may be understood only by a specialist. Moreover, each transaction appears to defy categorization … each deal is “unique”.

Partners and associates spend hours mulling over these documents, carefully crafting each paragraph, checking all the internal cross-references, updating dates and figures. Hundreds of hours of word-processing time may be spent on the numerous mark-ups of the documents, followed by hours of proofing these changes.

These documents are exceedingly profitable. But they are also ripe for automation. When automated, the time for production of quality first drafts …. even near final drafts, can be reduced by a factor of 100. Document automation can reduce 100 hours of attorney/paralegal/word processor time to less than 1 hour of an attorney’s time spent gathering and in-putting deal specific data. Don’t even mention all the typos and errors avoided in the process.

Huh!! You may ask, “Can you really automate such complex documents?”. The simple answer is: “we have”. When you evaluate transactional documents, patterns emerge. Certain text turns out to be boilerplate. Other alternative text is governed by clear rules. Any rules in the head of the leading attorney on the transaction can be captured as options in the text. With sufficient text preparation and time spent on template design, most of these rules can be anticipated and incorporated in the templates.  We  have done this with municipal bond offering, mortgage-backed securities, currency swaps, opinion letters, bank commitment letters, and a range of other complex transactional documents.