E-billing Solutions Deliver Data to Manage Legal Spend

The haves and have-nots will always feel the difference when the topic is e-billing solutions in corporate legal operations. This digital transformation in managing outside counsel billing and invoicing provides critical efficiencies for the law department. Those without e-billing solutions will likely suffer through manual review and processing of vendor payments. A manual billing process put in-house counsel at the mercy of the paper invoice delivered by outside counsel – what was submitted was more likely to get paid. In contrast, those law departments with e-billing solutions can digitize and automate the experience with greater benefit.

It’s not far-fetched to say that e-billing solutions have revolutionized finances in the legal department with greater optimization, more productivity, in-depth collaboration, and enhanced operational efficiency.

The Evolution of Legal E-Billing Solutions

The earliest indicators that e-billing solutions were necessary for the legal department stemmed from the relationships between in-house legal operations and outside counsel. Billing guidelines and rulesets were established in the early 1990s to enforce consistency with invoices, billing descriptions, timekeeper hourly rates, and more.

Commonly, and more specifically, the challenge areas for billing and invoice review that needed adjustment by legal operations included compliance; budgets as part of matter management; timekeeper charges; billables by unapproved timekeepers and/or partners; and poor descriptions associated with timekeeping.

Because invoice review began as a manual exercise, the advent of legal technology and e-billing solutions provided law departments with a more accurate option for bottom-line cost savings. By far, one of the biggest expenses in the legal department is legal spend. Planning for the anticipation of a legal event that requires the retention of outside counsel is impossible. The ability to manage the cost center budget depends greatly on e-billing solutions.

This ability to analyze legal spend across vendors and outside counsel became the impetus for more robust e-billing solutions and advancement with the software. E-billing solutions spawned enterprise legal management software for the corporate legal department so in-house counselors could improve vendor relationships, cut legal spend, manage budgets more accurately and consistently, and communicate with leadership about the overall health of the law department.

Digitization of invoices enabled enforcement of billing guidelines and compliance by outside counsel with those rulesets and guidelines. More communication about invoices ensued with law firms complying with clients and their need to manage legal spend.

Eventually, the LEDES format of e-billing was created around 1998. This helped the international legal community join the e-billing revolution and was successful in the implementation of standards across the pond.

Barriers to Entry of E-Billing Solutions

Despite the increased standardization of e-billing solutions in the U.S. and Europe, barriers still remain for further adoption in legal departments across the world. Some more obvious reasons may include:

• Change management – technology adoption by everyone in the law department takes time, training, repetitive use, and a mindset. Often, leadership needs to see proof points that software is worth the investment, and only then will they get on board to wholeheartedly support engagement and adoption.
• Software Monetary Investment – Software is not free. While there may be a “free” version or trial period, companies need to invest in legal operations software for the long term. Often, an e-billing solution is relegated to the bottom of the list after other more critical projects.
• Dedication by IT – IT support is not a luxury that all business units across a company enjoy. Other profitable business units may be the focus of growth and scalability while a law department responds to inbound issues with the same budget, regardless.
• Investment by Mid-Tier Companies – Regardless of the need for e-billing solutions to digitize and automate billings and invoice review, the investment may be a non-starter for mid-tier or smaller companies. Those corporations with high levels of legal spend and a budget to match require legal technology solutions to continuously promote growth.
• Law Department Maturity – Growth factors in a legal department contribute to advanced maturity and more robust and data-driven decision-making. When technology, like ebilling solutions contributes to analytics and strategy, that law department is more mature and can substantiate decisions with data. Ebilling solutions provide the ability to make data-informed decisions, especially in the area of legal spend.
• Law Firm Adoption – E-billing solutions are more agreeable to a legal operations professional in a law department than an accounting manager in a law firm. Law firm vendors to corporate counsel must comply with in-house billing guidelines and rulesets about invoicing, timekeeping and budgets. This creates issues with compliance from law firm to legal department until all challenges get resolved with use of billing software.
• Trust and Transparency – Adoption of a billing solution requires trust and transparency that contribute to successful long-term client relationships. No one on either side of the invoice wants to spend exorbitant amounts of time with billing guidelines, compliance, invoice accuracy, review, correction, or negotiation. That’s where acceptance of an e-billing solution can pave the way to a transformative relationship and confidence between the two parties.

In earlier billing systems, focused primarily on digital invoice submission, corporate legal operations didn’t have the opportunity to edit billing descriptions, dispute a charge or automatically correct errors in invoicing. Modern solutions have evolved into comprehensive platforms that offer those mentioned above and more in-depth reporting that helps drive strategic decisions about the overall health of a legal department’s bottom-line budget.

Setting Effective Billing Guidelines

One primary way to establish control over vendor invoicing is to implement billing guidelines. Legal operations professionals utilize billing guidelines through e-billing systems to ensure consistency and cost control. Here are several areas billing guidelines help to make invoicing consistent from vendor to vendor and add a level of compliance:

• Timekeeper rate controls and automatic rate increase tracking
• Approved timekeepers per respective matters
• Documentation and tracking of excessive billing
• Task and activity code requirements for detailed time entries
• Specific formatting requirements for narrative descriptions
• Multi-timekeeper billing restrictions for certain activities
• Travel expense limitations and compliance requirements
• Block billing prevention and minimum time increment settings
• Budget tracking and matter phase coding requirements

Benefits of E-billing Solutions

In reading through this article, it’s obvious that the two benefits of e-billing are management of legal spend and the legal department budget. We’ve mentioned that a law firm vendor that quickly adopts the legal department’s e-billing solution or enterprise legal management platform will develop a more satisfactory client relationship based on the fostering of trust and transparency.

Both law firms and the C-suite benefit from billing solutions. A digitized invoice provides the ability to manage numbers; determine the status of legal spend; see where matters are taking too long or going over budget; explore cost-cutting measures; and analyze which law firms are costing the company the highest budgets.
More specifically, e-billing software delivers numerous advantages to legal operations teams in a variety of areas, including:

Financial Control

• In real-time, any budget can be tracked providing leadership with the ability to adjust budgets up or down based on e-billing data
• Invoice review becomes automated with smart tools that flag errors, correct them or present them for further review and/or negotiation
• Outside counsel spend patterns can be identified, charted and analyzed to determine whether fees match legal services rendered and agreed upon
• Any alternative fee arrangements or other special billing can be monitored, tracked and adjusted

Process Improvement

• Billing guidelines provide a standardized billing process putting each vendor in compliance with the financial governance of the legal operations team
• E-billing solutions deliver one of the most critical benefits: reduced time for manual invoice review. Because in-house lawyers review complex matter invoices to ensure accuracy, their time is taken from practicing law and protecting the corporation. A lawyer should review the billing only for invoices of great complexity with many flagged areas.
• One positive way that e-billing solutions improve the bottom line of the legal department is the improved accuracy in cost allocation and cost-cutting abilities. Being able to zero in on costs helps the legal department better manage budgets, and this aspect of legal operations is critical for the entire company.
• Servicing a matter blindly without knowledge of outside counsel spend helps no one. In fact, it creates havoc after the matter is over because the law firm bills without guidelines, and the legal department has no knowledge of total billing. E-billing provides immediate snapshots of time, fees, spend, and other expenses so that everyone can communicate where problems lie and adjust during the course of a matter.

Data-Driven Decision Making

Mature legal departments, as mentioned above, use data to drive strategic decision-making. E-billing software delivers extraordinary data, and a legal operations team can and should utilize this data consistently to:

• Assess legal spend and analyze and troubleshoot problem areas e.g., higher-cost law firms
• Data delivers performance information and allows legal operations to benchmark that performance overall, matter by matter, for one practice area, and so on.
• Many legal departments are strapped with slim margins of talent. Legal spend insights provide necessary data to assess and allocate resources from assistants and operations managers to paralegals and lawyers.
• Forecasting legal spend and other costs is a luxury for legal departments; however, use of e-billing data provides that ability. Anytime data provides a truthful image of performance, financial metrics and future spend is a bonus for both the legal department and the C-suite to determine the overall health of the company for investors and the board of directors.

Greater Legal Department Efficiency

At a more granular level, e-billing solutions create a more efficient law department, and this is noted more so by legal operations teams that seek the following improvements:

• Automated invoice validation against billing guidelines
• Immediate flagging of non-compliant charges using the smart financial tools provided in e-billing software and enterprise legal management solutions
• Streamlined approval workflows that speed up invoice approvals and payments to vendors
• Automated expense categorization that is critical for managing costs and budgets
• Direct integration with accounts payable systems, and this is a must because disparate systems create fluctuations in workflow
• Automated budget alerts and notifications so lawyers know when outside counsel are over-billing or an erroneous charge has been added to the billing system
• Built-in reporting and analytics tools that provide in-depth analysis of legal spend so the finance team can improve its forecasting ability for the C-suite

Looking Ahead at the Future of Legal Department Software

At the core of a legal department is its financial software that enables cohesion with invoicing and billing among vendors. Law firms are slower to adopt technology than their in-house counterparts, suggesting a lack of adoption of billing applications.

Enterprise legal management software in the corporate legal department provides innovative integration of financial applications, contract lifecycle management, workflow, analytical reporting, vendor management, matter management, and much more. These applications are accessible to law firm vendors, enabling a collaborative workflow.

• Balanced Usability. E-billing is part of that equation, providing balanced usability among law firms and law departments.
• More Intuitive Interfaces. Technology vendors understand the distinct collaboration needs between law firms and legal departments, and robust enterprise legal management solutions provide that communication and collaboration. Law firms can access the ELM solution and upload their digital invoices directly to the legal operations team for review. Understandably, the joint goal is to reduce inefficiencies with PDF or paper invoices and enable a streamlined approvals process to close out an invoice in shorter periods.
• Real-time Matter Financing Review. One of the greatest benefits of collaborative invoice review is managing matter budgets in real-time. An electronic bill enables timekeepers to update time and billing descriptions weekly so those on the client side can determine budget status for matters. With greater visibility into matter status and budgets, leadership can more easily assess legal spend and strategic planning.
• Use of AI-powered financial applications. Many enterprise legal management solutions have AI-enabled financial applications that automatically review, flag, edit, and auto-correct invoice errors. In the future, AI applications will enhance the power of legal technology software so legal departments and law firms can synchronize their collaboration.

E-billing software has become indispensable for modern legal operations. By providing automated workflows, data analytics, and compliance tools, these systems help legal departments optimize their spending and operations. As technology evolves, e-billing platforms will increasingly leverage AI and machine learning to provide even more sophisticated solutions for legal operations professionals. Contact us to learn more.