Arguments for Legal e-Billing
IN-HOUSE TECHNOLOGY AND LEGAL E-BILLING
The use of technology within in-house legal departments is increasingly catching up with the IT/IS that has been available to the lawyers in the larger external law firms for some time. This is particularly true of the international firms with strong bases in the US or UK where a significant percentage of fee income has been invested in leading edge IT systems for many years. These solutions include such business applications as Document/Records Management, Knowledge Management, Matter Management, Litigation Support/eDiscovery, Cost Tracking, Resource Planning and Advanced Data Analytics. This is now extending to the latest trends in technology including using Machine Learning and AI (Artificial Intelligence) in the areas of document drafting, contract comparison and due diligence. These systems are increasing available to lawyers and support staff both in the office and increasingly “on the move” or working remotely.
Corporate Legal Operations is now becoming a major focus and these applications are increasingly available to in-house lawyers with the strategic vision to deploy them in an efficient and effective manner. One key area to look at is that of e-Billing (electronic invoicing) which is not just the provision of a legal bill as a PDF but a file of structured billing data – at a low level of detail – enabling in-house lawyers to a gain huge amount of added value from this cost and expenses data.
BACKGROUND OF e-BILLING
Like many legal technology systems, e-Billing began in the US in the mid-1990s. The interest in UK in e- Billing began in 2003, when UK branches of US insurance and finance organisations started demanding such functionality from their regional law firms, which led US e-Billing solution vendors setting up offices in the UK. Over the past decade, many e-Billing projects have been undertaken, with a number of law firms successfully e-Billing their largest clients to the value of many millions of pounds per year. In terms of market penetration, it is estimated that up to 90% of repetitive litigation work is now e-Billed in the US; and recently Tim Arvidson (Director of Accounting and Billing at Hawkins Parnell) reported that in many mid-sized US firms, around 70% of annual revenue is collected via e-Bills.
While the UK is not yet at this level, e-Billing currently accounts for 15-20% of the total volume of bills issued by the largest law firms in the UK market. With e-Billing clients being among the largest and most important clients for these firms this typically equates to approximately 25% of total revenue.
BENEFITS OF e-BILLING
What then is the driver for legal e-Billing and what returns do corporate legal departments expect e-Billing to deliver? Conventionally an e-Billing implementation has been driven by a desire to control external legal spend, but other non-financial and unplanned benefits have also been realised. The older “traditional” e-Billing solutions have delivered some real benefits such as:
- Clarity, consistency and transparency in the billing of legal services
- Compliance with the corporate legal department’s billing rules e.g. what will the client not pay for?
- Cost and expense tracking for every matter
- Access to data analytics and allowing comparisons across all external legal service providers
- Knowledge of what every external law firm is working on and who instructed them
- Assisting the decision-making process on which is the best option for undertaking legal work
- Improving the department’s internal processes – speedier work flow and paper reduction
LIMITATIONS OF CONVENTIONAL e-BILLING
Some of the criticisms levelled at these older e-Billing systems is that they are very cumbersome, if not “clunky”, and do not sit well with the current trend in IT for software to require “no installation”. Further to this they can only reflect the position “after the event” i.e. the legal bill has already been produced and sent to the client. Other negative comments often made are that the e-Billing vendors are too “corporate” and are inflexible in their approach. Also many law firms, especially those not using the large time and billing systems already, are not able to produce LEDES files and e-billing has not delivered on the promises often made to both clients and law firms.
MODERN LEGAL E-BILLING SOLUTIONS
Over the past few years new solution providers have come into the market – both in the US and from within the EU. Interestingly some of these, e.g. BusyLamp, have been founded by lawyers who realised that many clients (and law firms) were resisting the more “traditional” e-Billing solutions. These new solutions bring a fresh perspective to legal spend management and utilise tools and techniques that are breaking ground in the delivery of IT services. While not all products have these features they utilise a number of them, including ease of set-up, use of AI for the bill review process and a high degree of collaboration – allowing legal departments to review cost and expense data in the pre-billing stages of a matter. They also offer a low cost of ownership, integration with other legal department applications and support for a wide range of business processes from RFP and budgeting, through billing to a comprehensive management information and reporting suite.
MAKING THE BUSINESS CASE for e-billing
Quite rightly, in-house departments want to know the return on investment (ROI) of e-Billing solutions and whether they can measure it. (BusyLamp has a whole paper dedicated to how to make the business case for legal e-billing). There are a number of examples of what has been achieved in terms of in-house departments getting a positive financial return and the most of these results arise from such billing practices as the elimination of duplicate time entries, removing “block” billing, ensuring the right level of resources are utilised and minimising the possibility of erroneous charge-out rates. The fact that external lawyers know that the billing data is under closer scrutiny often improves the accuracy and ensures more prompt time recording.
There is much evidence to show that after the introduction of an e-Billing application, on average approximately 5 to 10% of the external lawyer’s costs can be saved. The exact savings potential also depends on how well the client has been positioned before the introduction of an e-Billing tool in the area of “Legal Spend Management”. It is important to note that from an economic point of view, the introduction of such a tool will always be worthwhile, because the savings are higher than the cost of the solution.
As noted earlier there are further non-financial benefits that can arise from an e-Billing implementation. We know that e-Billing helps in forming closer ties between law firms and in-house, adds value to the relationship and makes client/law firm meetings more productive. It is accepted that when both parties have access to more accurate billing information it reduces potential conflicts, allows the law firm to provide more than just basic billing data and can assist in discussions about alternative charging models. Indeed e-Billing is not just for charging billable hours but can be used to support various billing models – including fixed fee, retainer and value based pricing.
e-Billing DATA SECURITY AND DATA PROTECTION
Buyers and users of e-Billing systems need to ensure that the vendor understands and complies with all Data Protection regulations and has a high security rating for their data storage and communications functions. This is a hot topic at the moment – with both the increasing concerns about data security and data theft, and the General Data Protection Regulation, May 2018. The GDPR increases the existing obligations for Data Protection compliance including the transfer of personal information outside of the EU. It also massively increases the penalties for breaches of the regulations. This subject is too detailed to cover here, but potential users need to do appropriate research on preferred suppliers. Read our handy checklist of legal tech security considerations.
FINAL THOUGHTS on e-billing projects
The successful implementation of an e-Billing solution requires a serious approach from all parties, the in-house team, the law firms and the solution provider – with the right level of resources bringing the “buy-in” to the project. It is said that even the best application cannot deliver the right results without the people who use it applying the appropriate effort. (Read my three-part series on managing a successful legal technology project).
Finally it is fundamentally important to choose the right provider. We know that the modern e-Billing vendors are gaining new business and winning customers from the established providers – indeed clients must decide which e-Billing solution offers the best mix of usability, service, IT security, project experience and price TODAY. It is also essential to talk to existing customers and not only rely on the statements of the respective salesperson. From my own experience I can say that – “I’ve been working in legal e-Billing for about 15 years and I’m very impressed by how modern solutions like BusyLamp more and more not only succeed in large-scale RFPs against the established providers, but also deliver real and verifiable added value to the in-house corporate customer.” See it for yourself, get a demo today.
Bryan King – October 2017