How Can Law Firms Benefit From Legal E-Billing?

E-billing and its parent discipline of legal spend management came from the desire to serve in-house teams. The process requires law firms to submit invoices in a consistent LEDES format, enabling automated invoice review by the corporate legal departments and consistent data for reporting. This saves the legal department time and money by improving productivity, reducing erroneous bills, and enabling rate comparisons and data-driven decision-making.

Learn more: What is Legal E-billing?

E-billing is now well understood and not only in large firms. Over 70% of US mid-sized firms’ revenue is e-billed, and 25% in the UK. Many firms now have dedicated e-billing teams. Despite this, some firms remain resistant, mainly smaller firms processing smaller revenue amounts or unfamiliar with e-billing and LEDES, as they will have a steeper learning curve and initial cost and resource impacts. These firms can be reluctant to use a tool they perceive comes forced on them, especially in the short term; it will also mean their revenue decreases if the software spots and rejects invoices that do not meet the client’s billing guidelines.

BENEFITS OF E-BILLING FOR LAW FIRMS

The lessons will come from larger law firms, some of whom have been e-billing their clients since the 90s. While some of these firms will have also initially met e-billing with hesitation, they accept it is a cost of doing business with in-house clients, have fully functioning billing teams, and are now reaping the benefits and realizing that it can be a strategic revenue driver for the firm.

CORPORATE LEGAL DEPARTMENTS DEMAND TRANSPARENT RELATIONSHIPS

The knee-jerk reaction to e-billing is that corporate clients want to crack down on billing errors and get the cheapest rates. Instead, legal departments are looking for transparency and consistency. They want to be sure they are paying the appropriate cost, not necessarily the lowest cost. For example, this means not paying a partner for work a junior could do. Law firms unwilling to be open about line entry information may get thought of as hiding things. With so many law firms happily sharing this information, those who refuse to may need more work. With corporate legal teams looking for transparent relationships, refusal is a big risk.

HAPPIER CLIENTS LEAD TO HIGHER REVENUE

Yes, automated billing guidelines will likely result in the exposure of erroneous billing practices by the firm and a reduction in short-term revenue as these invoices are corrected. The gain for the firm is longer-term. The purpose of e-billing is not to “name-and-shame” and then fire non-compliant law firms. Billing guidelines can be complicated, and we’ve yet to find a law firm that doesn’t bill some errors. Corporate legal departments understand that this is a combination of human error and learning curves, which comes as part of the implementation process.

The benefit comes when the billing guidelines get created, reviewed, and amended so they are win/win for the client and firm. Using guidelines means that any conversations about disputed charges are less aggressive. Data can set future fees and expectations. The relationship becomes more fact-based and strategic. Happy clients that trust their firms will stick around and direct more work their way – we are seeing this trend already with many in-house teams reducing their panels to focus on fewer, higher-value relationships instead.

LAW FIRM INVOICES WILL GET PAID FASTER

Automated invoice review removes the need for manual checking of every bill. Those that meet the guidelines are approved automatically and can get paid faster. Many of our in-house customers commit to shorter payment cycles for electronic bills. This commitment can be a gesture to their firms that they view e-billing as a process that should be win/win. Some tools, like BusyLamp, allow law firms to submit “Work in Progress” or draft invoices for review or approval before submitting the invoice. In these instances, bills get paid even faster.

DATA-DRIVEN RELATIONSHIPS BETWEEN IN-HOUSE TEAMS AND FIRMS

Much of the conversation around legal spend management data and its benefits go towards the corporate legal department and the savings they can make using data analysis to inform decision-making. Law firms also benefit from this data; both parties can use spend data in negotiations, detailed matter information makes for more thorough reviews, and firms can offer different charging models, alternative fee agreements and fixed fees based on facts. With confidence, the pricing models are commercially viable. This also comes back to corporate legal departments wanting transparency; they’ll be confident and happy that the agreed charging models are fair. Taking it a step further, the law firm can set universal rates and prepare more accurate and competitive estimates by analyzing spend data from multiple corporate clients.

COMPREHENSION OF E-BILLING IS A VALUE-ADD

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 clients on e-billing issues, best practices, and tailoring data to meet the in-house team’s needs. Prospective clients in today’s business environment will expect and require law firms to know about e-billing and demonstrate that they can offer this service when making new business pitches. In this age of “new law,” a law firm that can provide more than just legal advice appeals to in-house teams. A lack of e-billing understanding may hurt client acquisition efforts.

IMPROVE LAW FIRM PROCESS EFFICIENCY

While the initial onboarding process may have its hurdles and learning curves, e-billing will help the law firm identify and rectify internal billing and processing inefficiencies, allowing for more time on higher-value work.

REDUCING POSSIBLE NEGATIVE IMPACTS OF E-BILLING

Despite these benefits, getting up and running with e-billing can be costly, time-consuming and sometimes frustrating for the law firm. Here are some ways the corporate legal department and e-billing vendor can help reduce and eliminate negative experiences and impacts.

• Some legal spend management solutions have pricing models that charge the law firm up to 100% of the subscription cost with no cost to the in-house team. Since the corporate legal department (rightly, so it fits their needs) gets to choose which e-billing tool to use, we think it’s unfair to charge the firm. We also believe that if the in-house team is paying for the tool, they are more motivated to use it to its full potential, which demands collaboration with the firm and maximizing the value of data that is input, so firms aren’t wasting effort entering unnecessary data. BusyLamp doesn’t charge law firms; ultimately, it’s up to the corporate legal team which solution and pay model they select.
• Training lawyers to use new software can be a significant, time-consuming challenge for law firms. One way around this is to set up dedicated e-billing teams – all the larger firms have these. If fee-earners are to use the tool, then thorough training and support from the legal spend management vendor are essential at onboarding and beyond. Vendors may charge different amounts for different levels of training. While “online help” is usually included, higher-value training such as face-to-face can carry an additional fee. As the in-house team would foot this bill, the corporate team needs to understand the value and importance of investing in training. However, no amount of training can rectify the frustrations that accompany a poorly designed software interface. The software buyers on the in-house side should review the user experience (UX) and interface (UI) for the law firm and the corporate side, as the law firm experience can be below par with some solutions. The BusyLamp interface is the same for law firms and corporate clients to ensure both sides have an equal experience.
• Corporate legal teams can reduce the number of rejected invoices (and therefore law firm frustrations) by including the law firms when agreeing on billing guidelines. Even if they do not, they should make them readily available and ensure the law firm understands them. Suppose an in-house team/law firm is currently unfamiliar with billing guidelines. In that case, we recommend starting with a few vital ones, as a large list from the off is more likely to cause confusion and inaccuracy. Law firms should also note unexpected rejections and errors, and the in-house team should be prepared and open to accepting and discussing this feedback.
• Data security is an important issue, and law firms can be understandably reluctant to start uploading their information to a system they have yet to review and select themselves. The corporate legal department should ensure they choose a vendor with comprehensive information and data security policies (BusyLamp holds ISO/IEC 27001), including GDPR.

Find out more about data security considerations in our in-house legal tech data security checklist.