Businessman working with invoice on digital tablet. Photo: Andrey_Popov/Shutterstock.com

While law firms may think they are complying with clients' billing guidelines, many can be shocked when they see deductions on their submitted invoices, according to a new report.

The "2020 CLM Defense Counsel Study," released March 18 and sponsored by tech companies Bottomline Technologies, Envision Legal, InvoicePrep and others, surveyed 400 mostly insurance defense attorneys. The report found that 74% of these attorneys feel they are complying with billing guidelines better than three years ago.

However, lawyers also report that after their client reviews the firm's proposed invoice, and an appeals process takes place, the original bill is reduced by 7%.

InvoicePrep founder, CEO and president Wayne Nykyforchyn said the "significant" reduction highlights that the process, people and technology needs to be improved.

Nykyforchyn noted the survey reported 89% of respondents didn't have software, separate from a time and billing system, to pre-check an invoice against client guidelines before submission, which he called a "startling" statistic given the 7% invoice reduction rate.

"We are 20 years into e-billing and invoice compliance, and 89% aren't using tools to go after that 7% they say they are getting reduced," he said.

Nykyforchyn explained firms can avoid significant reductions by adequately "translating" the description of the attorney's work to meet the client's guidelines. 

To be sure, creating an efficient, universal language to describe legal services is a task more associations are working toward as data-driven decisions become a mainstay in corporate legal departments.

Indeed, in December 2019, the International Legal Technology Association (ILTA) joined the Standards Advancement for the Legal Industry (SALI) Alliance to develop a "matter standard" for describing legal matters among law firms, corporate clients and legal tech companies. In February Winston & Strawn and a team of Am Law 100 firms, Fortune 500 legal-ops departments, alternative legal service providers (ALSPs) and others launched a collaborative effort to create real-time metric dashboards for diversity, pro bono engagement, budget accuracy, billing time and other measurements.

While initiatives are growing for more metrics, Nykyforchyn noted invoice reductions aren't completely driven by law firms not matching up to their clients' expectations.

Indeed, only 18% of respondents said the adjustments are objective and are based on clear guideline violations, according to the survey. Still, Nykyforchyn said the guidelines are detailed, but the bigger issue is many lawyers question the subjectivity of clients' third-party auditors.

"The guidelines are very detailed but there is this area around them called reasonableness that is very subjective. You can't have details around reasonableness and I think for the law firms it's hard for them to accept that," he explained.

Despite the growing need for details and data, law firms see client-required metrics as a challenge over the next five years.

"I think they are definitely challenged with keeping up with their clients in terms of collecting data to demonstrate the value they are giving to their clients. You need the tools and as far as your business, you need the people, the tools and workflows," Nykyforchyn said.