Outside Counsel Guidelines:
Law Firm Electronic Billing Challenges
BY JESS VAN WYHE
Electronic billing or e-billing has become commonplace throughout the legal industry and has evolved into becoming the dominant way for corporate law departments to reduce outside counsel legal spend. The adoption of e-billing is largely sold to corporations on the premise that it will save time and money, improve audit and analysis procedures, as well as provide a place to contextualize legal data to help make better decisions. However, it’s impact to law firms has undoubtedly increased complexities in the billing and collection departments along the way.
The General Process
Electronic billing systems have the ability to automatically reject invoices that do not comply with the billing rules set up by the client. An automatic system rejection means that the e-invoice failed to be sent through to the client’s e-billing system. Sometimes that could mean that if one line item or time entry on the e-bill is incorrect, the e-billing system will reject the invoice as a whole. If the e-bill makes it through to the system successfully, then it is put under review. The client review process involves a human analyzing for value, backup documentation, and more specifics to the legal services of the bill. There could be multiple reviewers before the e-bill is either rejected or approved to process payment. One hiccup or rejection in the process could really set law firms back in terms of collection time. If the e-bill never made it through the e-billing system to the client, and a collection call is made for that invoice, the client will truthfully say they’ve never received it. Ultimately, this could damage client relationships and therefore it is important to do concise research before contacting the client about e-bills in any context.
As e-billing provides key insight information to clients that magnifies errors made by law firms, it’s important to put great emphasis on attention and effort into setting up brand new e-billing clients in order to ensure a successful beginning to a long-term relationship. A good first impression can go a long way.
Standard Not So Standard
Law firms submit electronic invoices in a standard file format internationally recognized called Legal Electronic Data Exchange Standards or LEDES. The format is comparable to lines of code that display the typical information on a legal bill such as invoice date, time entry narrative, hours, timekeeper name, etc. Although there is a standard file format for e-invoices, many clients choose to customize how they want their invoices to be presented, submitted, or reviewed by matter. From a general perspective, the client specific requirements are usually laid out in a section of the Outside Counsel Guidelines (OCGs) or Billing Guidelines for law firms to commit to following upon engagement. OCGs often define the required electronic billing vendor clients expect the law firm to submit their invoices through, accepted codes (task, phase, activity, expense) to use by line item, forbidden words not to use in time entry narratives, timekeeper rate expectations, and more. Instead of including all matters for a client into one invoice, e-bills are typically invoiced at the matter level. Clients could have different fee arrangements set up by matter, which means those specific matters need to be set up differently to be presented how the client wants to see them in their e-billing system. Even further complicating things, there could be matters where the e-bill payment is shared in percentage by multiple clients where not all clients use the same e-billing system. Not all client requirements are called out in a standard format within their OCGs and many might not even be captured as they are the technical requirements of the e-billing systems.
In addition to myriad customization options, firms also have to deal with many different e-billing system vendors. Many of these vendors offer web-based platforms that allow them to easily track, review, approve, pay, report, and analyze all invoices submitted to them from multiple law firms in one place. Some corporate clients prefer to utilize their own custom-developed solutions as their e-billing portal. Law firm support staff needs to be able to understand and manage multiple e-billing systems to accommodate their clients. Within each e-billing system, clients have different options to toggle-on/off specific features. Therefore, not every client can be treated the same way even when they use the same e-billing system. Thus, documentation on where to find technical e-billing system requirements becomes very important to rely on successful e-bill submissions. A thorough inspection of the client’s e-billing system as well as their Outside Counsel Guidelines is a must to ensure a successful initial setup of a new e-billing client.
The Proactive Approach
In this stricter environment with little room for mistakes, law firms should implement strategies to improve compliance with client billing guidelines before the e-invoices are even submitted. Even though technology has created many of the challenges mentioned, it can also be part of the solution to automate repeated processes. A few best practices to consider include:
OCG Central Repository
The complexity of managing OCGs only increases as the length of the client-firm relationship continues because they are updated repeatedly throughout the year. Clients often send updated OCGs only by uploading the document to their e-billing system as a mass hit to all the law firms they use. Thus, as the intricacy increases more because OCGs are sometimes sent without highlighting changes or accounting for amendments previously agreed to between the firm and client, having once place to store them as a source of truth is a great start to better management and compliance.
Electronic Billing Onboarding Staff
Attain staff dedicated to onboard new e-billing clients to thoroughly setup e-bill templates based off of client guidelines and system requirements, provide a summary of timecard restrictions to applicable timekeepers working on the case, obtain timekeeper approvals in the e-billing portals, and submit the first e-bills successfully.
Attention to Documentation
Documenting summaries of client billing guidelines as well as e-billing system requirements to provide to timekeepers, billing coordinators, and collectors. Working with clients and e-billing vendors to ensure the e-bill is submitted the right way will help ensure the e-invoice is paid as quickly as possible with the least amount of work involved.
Time Entry Release Validation
Stop incompliant time entries from making the final e-invoice. There are third-party applications on the market that have the ability to either prompt a timekeeper with a warning or completely stop an incompliant time entry from being finalized into the billing system.
A Single Upload Interface
The ability to submit e-invoices, track rejections, and report data from one platform is crucial to learning where improvements can be made in the electronic billing process per client and per e-billing vendor.
Update billing policies to fully maximize technology
Although technology can help automate a lot of processes, a good process needs to exist first. Take the time to bring current billing policies up to date with electronic billing in the mix to ensure all situations are approached in unison and accounted for.
It’s best to approach the challenges of e-billing proactively to enhance client relationships and improve profitability.