Your Billing Process Is Wrong 'Time to Fix It!

There are reasons why law firm invoicing processes are so frustrating to managing partners and administrators.

The first is the advent and rapid growth of sophisticated, e-billing technology platforms like Visibillity, Allegient, TrialNet, CSC, Bottomline, Examen, Serengeti and Datacert. This entire “legal cost containment industry” has become even more powerful now, as more sophisticated and better capitalized companies swoop in to claim their share: Wolters Kluwer purchased TyMetrix and then later Datacert; Bottomline Technologies purchased both Visibillity and Allegient; Thomson purchased Serengeti; LexisNexis purchased Examen.

The second core cause of firms' challenges in this arena is the increasing utilization of internal or external legal auditors, each reviewing tens of millions of dollars in legal invoices annually, adjusting invoices at a rate necessary to demonstrate their value, much to the chagrin of the firms involved.

How Law Firms Have Responded

Law firms have responded to these challenges by hiring more billing staff and by having billing partners spend more time in the pre-bill process. Yet it's no wonder that these steps have not proven to be effective. The rules and guidelines firms are expected to follow are akin to a new set of business regulations. They are at a point of complexity and volume where current tools and personnel are extremely challenged in handling them all.

A typical firm must now contend with 10-15 distinct e-billing systems, each with its own quirks. We know of a $50M firm that has almost 110 individual e-billing clients, each with its own set of billing guidelines. Trying to manage this with current processes and limited e-billing specific technology is simply not feasible.

The Current Process

When it comes to issuing invoices, many law firms simply send them out to their clients and basically ask, “Is this ok? Does this meet your needs?” Then, invariably, when clients say an invoice is not correct and needs adjustments, firms move into a reactive mode, spending time in an appeals process and expending more human capital and resources, while often providing the same information that could have been offered up proactively during the initial invoice submission.

This approach is ineffective for multiple reasons. First, it delays payment. Second, it uses more firm resources inefficiently. Third, it can identify the firm as a “problem firm” in the eyes of the client. Clients set very specific requirements for what they consider to be minimum invoicing accuracy rates. These are usually in the 97% to 98% range. A firm with a pre-appeals adjustment rate of 5% can be seen as overbilling. There is a significant reputational risk at stake.

How Can Firms Improve The Invoicing Process?

First and foremost, firms not only need to adapt to this paradigm, they have to get ahead of it. Their clients use of very specific tools and techniques to “audit” invoices after the fact is well-developed and effective. Firms need to adopt similar, if not better, tools and techniques to better “prepare” invoices before the fact.

Second, firm partners must understand that it is the billing guidelines that impact reductions and related revenue, not the simple formatting requirements that relate to invoice submission. This requires both technology and expertise.

Firms Must Adopt Expert-Grade Technology

The technology needed by firms is not supported by current time and billing platforms or by platforms that simply facilitate the submission of electronic invoices. Instead, firms should look for e-billing specific technology that helps to prepare better invoice content and more accurate billing:

1. The platform must be able to support the rules of each distinct client.
2. The platform should have multi-tiered, line-by-line invoice validation functionality with the ability to autocorrect basic ( per se ) violations and flag other violating entries, while providing recommendations for the preparer, with online decision support.
3. Robust reporting and dashboarding of the invoice life cycle needs to be available, from creation and preparation (including appeals) to approval/payment ' including automatic capture and integration of post-audit reduction data from the client.

Firms Should Think Differently About Their Expertise

Put in Star Wars terminology: billing attorneys + billing clerks + administrative personal does not 97% billing accuracy make!

Firms must consider shifting the expertise from practicing attorneys, administrative staff and billing personnel to a dedicated invoice preparation function. This shift has already happened on the client side of the equation.

This expertise, combined with the technology, should enable firms to answer these critical five questions:

1. What is each client, e-billing system and external auditing service looking for in our invoices?
2. Who is actually reviewing the invoices we send? Is it the client? A third-party service?
3. Over the course of the last year, what categories of adjustments have been taken by each respective client or client representative?
4. What dollar and percentage value do those adjustments represent?
5. How do those findings overlay against individual timekeepers? Which timekeepers are consistently having the greatest challenges in each category?

The Upside

With the right technology and resources, firms should expect to see significant improvement in accuracy rates and subsequent improvement in payment flow. Firms that do this well are paid more (and more quickly) for their work with less effort. When this happens, firms more than recoup their investment in the expertise and technology needed.

However, there are important “softer” benefits as well. By supporting a quality invoice preparation process, partners position their firms as high-performing, demonstrating to their clients that their firm respects the importance of client guidelines and that the firm cares enough to get it right the first time.

Wayne Nykyforchyn is the founder, CEO and president of InvoicePrep. He is also the founder of Allegient Systems and InvoicePrep, a tool for assisting law firms in dealing with the increasing invoicing demands of their clients. This article also appeared in Legaltech News, an ALM affiliate of this newsletter.