Helping a Client Select an e-Billing System

[Editor's Note: This newsletter's June 2003 article on electronic invoicing from the law firm perspective advised firms to influence clients to select a system or service that won't cause major problems for the law firm. Here's a practitioner's advice on specific topics to explore with your client in searching for a win-win solution.]

Law firms have a legitimate interest in encouraging clients to select and implement e-billing software that is cost-neutral or, preferably, advantageous to the firm. While many factors contribute to a mutually profitable e-billing setup, your research and potential advice to the client should cover at least the following basics:

• Charges. Charges to law firms vary widely, from no charge (Serengeti Law), to annual fees/client (DataCert), to a percentage of the fees billed (Tymetrix). [Editor's note: The aforementioned June 2003 article analyzes pricing methods.]

• Data Standards. The Legal Electronic Data Exchange Standard (LEDES) was adopted by a consortium of law firms, corporate clients, and vendors in 1998. Essentially, it permits law firms to generate a uniform set of billing data no matter what their time and billing system.

To output LEDES data, law firms generally purchase a module from a software vendor. The problem is that many e-billing vendors require modifications to the standard LEDES output, negating the purpose of having a standard. It is therefore important to ask any vendor whether they require LEDES and, if they do, whether they require any modifications to the standard output. Obviously, the more modifications necessary, the more problems for law firms coming onto the system. [Editor's note: The September 2003 edition of this newsletter details the new, XML-based LEDES 2000 standard, which greatly expands the flexibility of LEDES.]

Most clients prefer LEDES invoices because they come through in a single format that can be analyzed by their e-billing system. However, clients who also work with smaller or foreign law firms may need a system that can also accept non-LEDES formats (Word, Acrobat, etc.), so that they can get all their outside firms onto a single system.

• Billing Codes. Some e-billing systems require Uniform Task-Based Management System (UTBMS) task and activity codes for every time entry in the bill. This can cause problems for lawyers not used to entering codes when recording their time ' as well as for billing clerks, who generally have a hard time coding time entries recorded by lawyers.

The UTBMS codes were released years ago by the American Bar Association and the American Corporate Counsel Association with much fanfare about how they would permit clients to compare the costs of performing legal work across multiple firms. In practice, many law firms and clients have found them difficult to use and of questionable benefit.

The annual ACC/Serengeti Law survey found that only 4% of companies currently require such coding from any of their firms, down from 7% the year before. And about one-quarter of these companies admitted that they don't use the coded data they receive.

You should therefore confer with the client on whether UTBMS codes are worth the effort. If they are not, advise the client to ensure that the installed system will not be set up to require the codes.

• Ease of Implementation and Use. Ask vendors how long it takes to implement their system with all of a company's law firms ' and whether they have had any incomplete implementations where not all firms could get on the system. Press for details, and perform additional research to verify that installing a vendor's software at your firm will not cause operational problems.

Once an e-billing system is set up, you'll want it to be easy to submit bills and to deal with inevitable errors. Go through the bill submission process step by step, and find out if this process differs for LEDES and non-LEDES bills.

You may also want to learn how budgets, expense receipts and other bill-related information are submitted. Finally, you should check to see what types of errors are caught during invoice submission, how the firm is notified of errors, and what information is given to the firm to expedite error correction.

• International Capabilities. Many companies now are working with law firms that bill in international currencies. This can present a problem for e-billing systems that process only a single currency. Most clients want to have all their law firms on a single e-billing system, so that their spending reports are complete. If a client has international legal work, help him or her find a system that can handle international currency bills, currency conversions, value-added taxes, and other information unique to foreign bills.
• Invoice Auditing and Exception Handling. Presumably, the client will carefully evaluate the bill processing, auditing, and reporting capabilities on his or her side of a candidate e-billing system. From the law firm side, you'll want to learn how bill revisions are handled, whether you'll receive clear and timely explanations of why bills are revised, and how you'll know which bills have been approved for payment. Some systems now permit clients to make line-item electronic comments to bills, which are conveyed to law firms with the approved bill. Such features can streamline the process for resolving billing questions through the system.

Increase your chances of having bills paid on time and without revision by learning what electronic audits will be performed on your e-bills. E-billing systems commonly flag violations of client expense reimbursement guidelines, changes in hourly rates, etc.

By understanding what audits a system may run, your firm can make life easier for everyone by catching such problems before the bills are sent.

• Exchanging Other Information. Find out if the vendor provides matter management features in addition to e-billing. Once you have the e-billing connection established, it may make sense to use the same connection to send budgets, status reports, calendars, contact information, documents and other information into the organized online file system established for e-bills.

• System Growth. No system is perfect. When selecting one, therefore, it's important to consider how it has grown and will grow in the future. The vendor should be able to provide a history of releases, as well as plans for the future.

Ask how many users are now on the system, talk with some of them, and find out how system upgrades are handled (including costs). You may also want to find out what advance notice and training are available for releases that involve significant changes.

As in any technical acquisition, it's prudent to inquire into each vendor's financial stability and commitment to the product line.

Conclusion

Although counseling your client triggers the standard professional rule that the client's interest must take precedence, some level of forthright self-interest is appropriate. Clients should recognize that your firm ' just like their organization ' needs to avoid excessive charges, unnecessary system duplication, drawn-out implementations, adverse technical or operational side effects, and usability problems.

Law firms that take a proactive role in helping their clients select an e-billing system can strengthen their relationships with their clients and end up with a system that is the best match for both parties. Rather than waiting for your clients to decide, it's worth opening a dialogue about this new technology, which appears to be here to stay.

This article is adapted from a more wide-ranging article the author wrote for Legal Times (“E-billing Without the Pain,” Feb. 2, 2004). 

[Editor's Note: This newsletter's June 2003 article on electronic invoicing from the law firm perspective advised firms to influence clients to select a system or service that won't cause major problems for the law firm. Here's a practitioner's advice on specific topics to explore with your client in searching for a win-win solution.]

Law firms have a legitimate interest in encouraging clients to select and implement e-billing software that is cost-neutral or, preferably, advantageous to the firm. While many factors contribute to a mutually profitable e-billing setup, your research and potential advice to the client should cover at least the following basics:

• Charges. Charges to law firms vary widely, from no charge (Serengeti Law), to annual fees/client (DataCert), to a percentage of the fees billed (Tymetrix). [Editor's note: The aforementioned June 2003 article analyzes pricing methods.]

• Data Standards. The Legal Electronic Data Exchange Standard (LEDES) was adopted by a consortium of law firms, corporate clients, and vendors in 1998. Essentially, it permits law firms to generate a uniform set of billing data no matter what their time and billing system.

To output LEDES data, law firms generally purchase a module from a software vendor. The problem is that many e-billing vendors require modifications to the standard LEDES output, negating the purpose of having a standard. It is therefore important to ask any vendor whether they require LEDES and, if they do, whether they require any modifications to the standard output. Obviously, the more modifications necessary, the more problems for law firms coming onto the system. [Editor's note: The September 2003 edition of this newsletter details the new, XML-based LEDES 2000 standard, which greatly expands the flexibility of LEDES.]

Most clients prefer LEDES invoices because they come through in a single format that can be analyzed by their e-billing system. However, clients who also work with smaller or foreign law firms may need a system that can also accept non-LEDES formats (Word, Acrobat, etc.), so that they can get all their outside firms onto a single system.

• Billing Codes. Some e-billing systems require Uniform Task-Based Management System (UTBMS) task and activity codes for every time entry in the bill. This can cause problems for lawyers not used to entering codes when recording their time ' as well as for billing clerks, who generally have a hard time coding time entries recorded by lawyers.

The UTBMS codes were released years ago by the American Bar Association and the American Corporate Counsel Association with much fanfare about how they would permit clients to compare the costs of performing legal work across multiple firms. In practice, many law firms and clients have found them difficult to use and of questionable benefit.

The annual ACC/Serengeti Law survey found that only 4% of companies currently require such coding from any of their firms, down from 7% the year before. And about one-quarter of these companies admitted that they don't use the coded data they receive.

You should therefore confer with the client on whether UTBMS codes are worth the effort. If they are not, advise the client to ensure that the installed system will not be set up to require the codes.

• Ease of Implementation and Use. Ask vendors how long it takes to implement their system with all of a company's law firms ' and whether they have had any incomplete implementations where not all firms could get on the system. Press for details, and perform additional research to verify that installing a vendor's software at your firm will not cause operational problems.

Once an e-billing system is set up, you'll want it to be easy to submit bills and to deal with inevitable errors. Go through the bill submission process step by step, and find out if this process differs for LEDES and non-LEDES bills.

You may also want to learn how budgets, expense receipts and other bill-related information are submitted. Finally, you should check to see what types of errors are caught during invoice submission, how the firm is notified of errors, and what information is given to the firm to expedite error correction.

• International Capabilities. Many companies now are working with law firms that bill in international currencies. This can present a problem for e-billing systems that process only a single currency. Most clients want to have all their law firms on a single e-billing system, so that their spending reports are complete. If a client has international legal work, help him or her find a system that can handle international currency bills, currency conversions, value-added taxes, and other information unique to foreign bills.
• Invoice Auditing and Exception Handling. Presumably, the client will carefully evaluate the bill processing, auditing, and reporting capabilities on his or her side of a candidate e-billing system. From the law firm side, you'll want to learn how bill revisions are handled, whether you'll receive clear and timely explanations of why bills are revised, and how you'll know which bills have been approved for payment. Some systems now permit clients to make line-item electronic comments to bills, which are conveyed to law firms with the approved bill. Such features can streamline the process for resolving billing questions through the system.

Increase your chances of having bills paid on time and without revision by learning what electronic audits will be performed on your e-bills. E-billing systems commonly flag violations of client expense reimbursement guidelines, changes in hourly rates, etc.

By understanding what audits a system may run, your firm can make life easier for everyone by catching such problems before the bills are sent.

• Exchanging Other Information. Find out if the vendor provides matter management features in addition to e-billing. Once you have the e-billing connection established, it may make sense to use the same connection to send budgets, status reports, calendars, contact information, documents and other information into the organized online file system established for e-bills.

• System Growth. No system is perfect. When selecting one, therefore, it's important to consider how it has grown and will grow in the future. The vendor should be able to provide a history of releases, as well as plans for the future.

Ask how many users are now on the system, talk with some of them, and find out how system upgrades are handled (including costs). You may also want to find out what advance notice and training are available for releases that involve significant changes.

As in any technical acquisition, it's prudent to inquire into each vendor's financial stability and commitment to the product line.

Conclusion

Although counseling your client triggers the standard professional rule that the client's interest must take precedence, some level of forthright self-interest is appropriate. Clients should recognize that your firm ' just like their organization ' needs to avoid excessive charges, unnecessary system duplication, drawn-out implementations, adverse technical or operational side effects, and usability problems.

Law firms that take a proactive role in helping their clients select an e-billing system can strengthen their relationships with their clients and end up with a system that is the best match for both parties. Rather than waiting for your clients to decide, it's worth opening a dialogue about this new technology, which appears to be here to stay.

This article is adapted from a more wide-ranging article the author wrote for Legal Times (“E-billing Without the Pain,” Feb. 2, 2004).