Strengthening the Relationship Between In-House Legal Teams and External Firms

The conventional view of electronic invoicing (e-billing) focuses on managing legal spend, potential cost savings, and the ability of in-house counsel to compare the efficiency of their panel firms. Consequently, there are less obvious — but real and measurable — benefits arising from a successful e-billing implementation.

Some known benefits for clients claimed for e-billing are that it reduces false charges, enforces compliance with the billing guidelines, and ensures that the seniority and, thus, charging rates of lawyers working on a matter is known to the client. Some clients rigorously enforce their billing rules, and e-billing provides a way for stricter application of these rules than paper-only bills. While this strict compliance with the rules is more prevalent in the US, we are also seeing more rigour brought to bear in enforcing what can (and cannot) appear on legal bills in the UK and mainland Europe.

Typical billing restrictions of this nature are that clients will not pay for certain expenses – for example, telecom charges, administrative overhead, and online research. Some further examples of external counsel guidelines are:

• Law firms should use appropriate resources for performing specific tasks – such as partners not being used on more junior-level tasks/activities.
• The client will only pay for time spent traveling if that time was productive (i.e., the lawyer worked while they were traveling).
• Clients can specify that only one external firm lawyer should attend certain types of meetings and will be able to verify that this happens.
• That several distinct tasks are not “block billed” in a single amount and to avoid using vague time narratives.

Download “Getting Started with Billing Guidelines” for more examples.

STRENGTHENING THE RELATIONSHIP WITH LAW FIRMS

There are, however, further indirect benefits gained from e-billing in terms of establishing closer working relationships between clients and their external advisors and opportunities to form mutually positive ties on a longer-term basis. Examples of these types of “added value” benefits are:

Law firms can offer more access to internal data not ordinarily available to the client, for example, written-off /unbilled time and nonchargeable work done for the client. Firms can also categorize billed time by the client’s work breakdown/cost codes and improve the value to the client of the information in the e-bill. It means that more comprehensive information about each matter is available to both law firm and the client. This improves the quality of the discussions at relationship meetings, for example.

Law firms should see e-billing as a marketing tool and something to offer to new and existing clients. Many law firms are experienced in e-billing and can advise on e-billing issues and how to best tailor billing data to meet the client’s needs. Prospective clients now require law firms to be knowledgeable about e-billing and demonstrate that they can offer this service when making new business pitches.

E-billing can facilitate a fresh dialogue between law firm and client about the pricing of legal work and the use of more flexible cost models. An example is where part of a matter gets priced with part according to time-based billing, and part is fixed-fee work. This costing type only gets achieved if both parties are comfortable with the work done and at what stage or phase of the transaction. E-billing is the only way to measure and make visible this work breakdown for both parties.

Finally, several studies have shown that using e-billing software results in faster payment of the lawyer’s bills. E-billing tools significantly reduce the client’s manual workload for invoice validation, resulting in quicker invoice approval and payment.

All this shows that using e-billing software can improve the relationship between law firms and clients. Regarding business life, there is probably no closer relationship than that between a lawyer and a client. Such a close relationship is based on transparency and, therefore, must avoid information asymmetries. This applies not only to the content of the case in which the law firm is advising the client but also to the costs arising from that advice.

Modern e-billing providers like Onit’s European legal spend management solution BusyLamp e-billing.Space contribute to strengthening the relationship in this respect. They have set themselves the goal of establishing the use of e-billing for the client and the law firms as a smooth process.