Originally published in Corporate Counsel Business Journal
As billing guidelines get more complex and in-house counsel are crushed with mounting workloads, your law department may need more than e-billing to uncover non-compliance.
E-billing helps law departments manage invoices, track operational and financial performance, and handle related information such as budgets, accruals, timekeeper rates and value-based fee arrangements. These are key foundational elements to a modern legal operations department.
However, there are some common challenges in legal operations that e-billing doesn’t address, like increasingly complex billing guidelines coupled with the ever-increasing workloads of in-house attorneys.
There was a time when billing guidelines were rarely used. Then a few simple guidelines became common. Now, billing guidelines are widely used, and are nuanced and varied across different organizations. With more complexity and a broader range of clauses, guidelines are more challenging for law firms to understand and comply with. On the in-house side, they are more difficult to track, manage and enforce.
In a 2017 survey conducted by Gartner and Wolters Kluwer’s ELM Solutions, three out of four organizations reported that they either have guidelines in place or are developing them. However, only 6% of respondents said that their guidelines are crafted in a way that makes auditing invoices very easy. The satisfaction rate with billing guidelines is low – at only 31% – and not a single respondent said they were completely satisfied. Billing guidelines clearly aren’t as effective as law departments would like them to be.
Why is dissatisfaction so common when it comes to guidelines? It’s in part a result of trying to leverage tools for more complicated tasks than they were originally designed for. E-billing systems manage billing guidelines by being the first line of defense for identifying violations – and they do the job well with straightforward issues. But the intricacy of some modern guidelines means that e-billing can’t always capture every instance of non-compliance.
Problems with billing guidelines are, at their core, communication issues. Guidelines should communicate to firms what is expected of them when they invoice, while invoices should communicate the value of the work done for an organization. So why does such a critical aspect of the inside-outside counsel relationship often let both sides down? Consider the following hypothetical, but realistic, scenario:
You are a partner at a major law firm that has a thousand clients. Each and every one of them has different billing guidelines – if they have billing guidelines at all – and in your experience, you will often be paid the full amount of any invoice submitted regardless of whether these billing guidelines are adhered to.
One of your clients emails you with new billing guidelines on a Tuesday evening. You have been at trial for the last two weeks, because another client is getting sued for $50 million. You open the document and it’s 20 pages of jargon. One of your associates is calling you about another legal matter that took an unexpected turn for the worse earlier that day.
What do you do? Not many in this situation would take the time to read and understand the rambling document. Of course, the guidelines would be given their due attention in a perfect world. But lawyers don’t live in perfect worlds and misses like this happen all the time.
Just hit approve
Similar problems plague the in-house side. Inside counsel are busy. Their training, and their interest, is in practicing law. Few have been carefully trained on invoice review and what to look for in line items. Like their outside counsel counterparts, corporate counsel also frequently have not had time to read through and absorb all of their billing guidelines.
Even if the in-house counsel is an ace reviewer who knows the guidelines well, chances are they’ll want to avoid conflict with outside counsel. The attorney submitting the invoice is often a personal friend, or at least a colleague that they have been doing business with for years. Those relationships are important, and they want to continue to be a priority client. So it isn’t unusual for reviewers to give invoices only the most cursory skim and then just hit “approve”. But the problem with that is that careful bill review can have very high ROI – just a few minutes, in fact, can save thousands of dollars.
Help is available
Fortunately, partnering with the right legal technology vendor can achieve great ROI without taking up more time. By fully leveraging e-billing technology, data and analytics, and introducing advanced technologies such as artificial intelligence and machine learning, the right ELM provider can help an organization increase its billing guideline compliance and reduce a department’s overall legal spend.
Not every law department is the same, especially when it comes to overall operations and legal spend management strategy. Wherever your legal function is, it is critical to choose a vendor that can offer the full range of spend management capabilities, powered by leading edge technologies and offering deep domain expertise.
ELM Solutions offers comprehensive, end-to-end spend management comprising both advanced technology, such as the LegalVIEW® data warehouse, with over $130 billion in detailed legal spend data and decades of legal operations expertise. It can help to address the pain points discussed here and to support a steady progress toward more comprehensive spend management.