The law and money Credit: iStock/Cristian Baitg
|

The timecard is the unit of revenue for law firms and is therefore the most critical means of interacting with the client: It is the most direct communication of value and, as such, can help build or destroy the attorney-client relationship.

Outside counsel guidelines (OCG) have complicated this fundamental client touchpoint, however. Specifically, 79% of clients reported using OCG to control for the primary purpose of controlling costs—and this means billing. In general, OCG stipulate contractual terms and conditions across these three main areas:

  1. Process and procedures such as conflicts, case assessment, status reporting, and staffing;
  2. Policies and policy management including security and cybersecurity, general compliance, confidentiality; and
  3. Client billing guidelines, including fees, expenses, invoicing procedures, and appeals.

Since it is cost control that is the stated primary purpose of OCGs (and legal departments in general), it should come as no surprise that e-billing is also leveraged to enforce billing compliance in nearly every single legal department.

If this were not enough challenge, OCGs also now capture a vast array of very complex and unique billing arrangements. By 2018, the types of alternative fee arrangements have tripled to include a vast array of types including: fixed fee per matter, blended rate, flat fee to handle matters in a given area, fixed fee with a collar or a cap, budget based monthly billing, risk sharing, contingencies, auctions, etc.

Putting all of this together, for many firms, billing compliance with outside counsel guidelines is a challenge. In fact, billing compliance is so complex and overwhelming that, rather than solving the challenge, it is cast aside as a cost of doing business and firms simply accept the cycle of appeals, payment delays, fee reductions and write offs. For some firms, this cost translates into $15,000 a day—or nearly $4 million annually.

This cost is not acceptable—when declining realization is factored in, this means that firms are not being paid for nearly 20% of the work that is being done.

Research consistently shows what separates the most financially successful firms from the competition is an ability to both produce a higher number of billable hours, and also to capture and bill a better percentage of those fees. This is achieved through better timekeeping and delivering high quality timecards. Better timekeeping and achieving 100% invoice acceptance—rather than writing off almost 20% of a firm's work–has obvious trickle-down and trickle-through effects that directly impact almost all aspects of a law firm's business, including its investment strategies.

Beyond lost revenue, outside counsel guidelines are a contract of clients' expectations. Delivering on client expectations is the bedrock of everything a law firm does and desires to do; therefore, efficiently complying with OCG is paramount to the longevity of the relationship. Before there are innovations that sound “innovative,” an unassailable timecard delivery is what clients are telling their firms they want.

Surprisingly, less than 15% of firms have a formal process in place for complying with outside counsel guidelines, so it is no wonder so many write off the challenge as a cost of doing business. Like with other essential functions within the firm, there is no way to achieve effective management of guidelines without having a process in place.

|

The Road to 100% Invoice Acceptance

There should be 100% acceptance/approval of an e-bill on the invoice on the first submission. Any firm falling short of this should be on the road with 10% as the goal. Achieving billing compliance requires maximizing the quality of the firm's timecard inventory. When something jeopardizes the validity of the timecard—whether inaccurate timekeeping—or completing the timecard in a way that does not align with OCG, the firm will have a billing compliance issue.

Here are a few key steps that any firm can take to improve the quality of the timecard, and work toward achieving billing compliance:

1. Centralize all guidelines into one repository.

2. Assign Responsibility. As important as having a formal policy in place is, someone will need to own the process in order to ensure that the process is followed.

3. Create OCG Summaries. OCGs are known for their complexities: long, poorly worded and not well structured. It's impossible to execute on OCG if you (or your timekeepers) don't know what's in them. A summary document should be created that highlights the most important components of the guidelines that need to be adhered to.

4. Train Attorneys. In your quest to create a higher quality timecard inventory, timekeepers are a crucial component. Understanding that attorneys are working with multiple clients and remembering each unique set of billing rules can be challenging. That's why it is important to make them part of the process and summarize what is relevant to them.

5. Leverage Technology. Technology can assist you with managing compliance at almost every phase in the process. This will minimize opportunities for human error, allow you to optimize staff resources and prevent dollars lost due to non-compliance. When you can leverage technology to address OCG, do the following:

  • Automate compliance at the point of time entry.
  • Notify timekeepers regarding approval rates.
  • Centralize your guidelines.
  • AI for billing guideline review.
  • Automated training programs for attorneys.

While OCG and billing compliance is a complex undertaking, it is manageable (thanks very much in part to recent technology advances that minimize the need for manual work). Most firms are losing a significant amount of revenue to non-compliance—which is unacceptable. Not only will this loss jeopardize your firm's profitability and competitiveness, it can have a lasting impact on the relationship with your clients.

Gabriela Isturiz is founder and President of Bellefield Systems, a technology company committed to helping law firms manage outside counsel guidelines, recover more billable time and enable firms to achieve their revenue goals. She can be reached at Gabriela Isturiz, [email protected], and connect with her on LinkedIn: linkedin.com/in/gabrielaisturiz/