E-Billing Metrics, KPIs and Reporting for Law Firms
Law Firms and e-Billing
Many law firms, of all sizes, are now generating their legal bills in electronic format; submitting them through an e-Billing vendor system to the client. This is known as “true” e-Billing, as opposed to a law firm simply keying the billing data into a web portal and/or uploading a PDF copy of the bill. For those firms using full e-Billing, metrics can be used to monitor how well the function is performing.
Law firms have implemented e-Billing in different ways and there is no ideal method– the approach taken will often depend on the firm’s culture, its preferred organisation and structure, technical considerations, available resources and even which clients are asking for their bills to be delivered this way. What is important, however, is for the law firm to know how efficient and effective their processes and procedures are for dealing with this important business area. It is clear that inefficient processes will lead to a backlog of bills waiting to be passed to the client, bills being rejected and having to be repeatedly rectified, delays at various stages, and ultimately an impact on cash flow – all of which leads to unhappy clients and partners.
Which aspects of e-billing should law firms measure?
Who needs to know how well the e-Billing function is performing? Who are the interested parties? It is generally accepted that there is no one “owner” of e-Billing in a law firm and many business areas will have an interest. The e-Billing stakeholders include the firm’s lawyers, the relationship partner, revenue controllers, finance staff, the e-Billing team, finance systems team, matter managers and the business development team will all have an interest – and often from a different perspective.
The key objective is to understand the e-Billing function, its areas for improvement, and how these improvements will add value to the law firm.
To address this objective, consider these four questions:
- What do we want to monitor and why is it important?
- What information do we have that will allow us to make the measurements?
- How should we record the metrics and KPIs (Key Performance Indicators) and present results to the relevant people?
- Over what time period can we take the measurements to allow for like-for-like comparisons?
Supporting the law firms e-Billing function
How can we develop reports and associated monitoring tools to support the e-Billing function and provide useful information to the stakeholders?
e-Billing Tracking Applications for Law Firms
Many law firms have developed an e-Bill “tracking” application for internal use, and this can be used to provide status reports on e-Bills being processed as well as other key items of information. The tracking application, which can be spreadsheet based, will provide a high visibility of e-Bills being processed and provide an analysis of bills rejected, the reasons, the fixes required and who is responsible. The responsible person, usually the e-Billing co-ordinator, should update the tracker in as close to real time as possible.
This “tracker” tool can be used with the invoice return form, as described in the next section, to provide essential and structured information to stakeholders. It gives revenue/finance staff, lawyers, and the e-Billing team visibility on the status of e-Bills as they progress through the various business units and into the e-Billing system. Used correctly these tools will formalise the feedback process and help teams to manage their workloads. They will also help in prioritising e-Billing requests and protect the e-Billing team from having to respond to “the last and loudest” user request.
The summary of information from the tracker can be used to ascertain most of the management reporting defined below.
Reporting on e-Bill rejections
At the basic level, lawyers need to know if a particular e-Bill has been successfully uploaded or not, and if it has been approved for payment by the client. If the bill is rejected they will also need to know the reason and who is responsible for the amendment(s) required. For example, is it a legal issue that needs expert knowledge or can it be resolved by the e-Billing team? This could be addressed by having a formal online “invoice return” form which can be used by the e-Bill uploaders to notify the relevant function of rejected invoices and the expected resolution. Such a form can be used in the law firm as a way of formally recording rejected e-Bills; where they are sent for resolution and the outcome, rather than rely on phone calls, e-mails etc. It will also be used to produce further reporting statistics on e-billing performance.
It is vital that the e-Billing team fully understand the statistics available from the e-Bill validation process and uses them, in conjunction with the business, to drive continual improvement of e-Billing and related data quality and accuracy.
One of the key indicators of the effectiveness of the e-Billing function is the reduction in the number of e-Bills rejected by the client’s legal spend management system over a given time period. (Ideally this will be trending towards zero over time). For example, we could record for a given batch of bills (say weekly by client) how many e-Bills were loaded, and of those, the percent
- that passed validation at the first attempt,
- needing timekeeper data,
- needing charge out rates,
- with missing task/activity codes,
- without narratives,
- for other errors,
- returned for “legal” reasons,
- for suspected block billing.
The aim is to reduce the percent of e-Bills failing validation at each stage and to measure the improvement over time by examining and acting on the root causes of rejections.
Some further metrics and KPIs that support the e-Billing function
A fairly simple indicator to measure effectiveness would be “Bills received by the e-billing team this week” (value and number) and “Bills uploaded to various e-Billing vendor software.”
However, it is more useful to take this analysis further and provide a detailed breakdown of the e-Billing process. For example, every month a report can be generated to show the number of e-Bills received by the e-Billing team with their monetary value, and the % of the total e-Bills for some (or all) of these categories –
- Bills uploaded to the e-Billing vendor software
- Bills rejected/returned for correction or amendment
- Bills with errors on first and subsequent submissions
- Bills awaiting amendment by the legal teams
- Bills with the client for authorisation
- Bills authorised for payment
Other reporting metrics can focus on key highlights (e.g. Five new clients expected to go live this month), named clients (e.g. Why does client xyz have high % of bills awaiting authorisation?) and action points for the week (e.g. Focus on missing time narratives with this particular legal team).
There is no one correct way to display or represent some (or all) of these metrics and KPIs. Much will depend on the audience and the level of detail required. Generally, senior management will only need a summary of the data and/or problem areas highlighted. By contrast, the e-Billing/revenue/legal teams will need more detailed information that enables better management of their workload. If possible, the use of graphics and a dashboard should be considered. This makes easier to consume and understand the data, especially when identifying trends and changes over time.
How do we set goals/targets for the e-Billing and related functions?
Like all business units the e-Billing function should have goals set to assist them in improving their service levels. Some of these targets are not the sole responsibility of the e-Billing team and will require input and co-operation from the revenue and legal teams. It goes without saying that law firm management will have to support this and ensure that other business units comply with the objectives.
However, some useful performance/operational targets to consider are:
- “Add new clients for e-Billing in xx days if that client’s preferred LEDES format is already in use”
- “Reduce rejected invoices and write-offs by (e.g 60%) over the next month”
- “Monitor and reduce how many e-Bills do not have the required mandatory fields present before attempting to upload them to the e-Billing system”
- “Reduce days taken from bill generation to loading into the client’s e-Billing portal”
- “Reduce times e-Bill is rejected after first being loaded to bill being accepted by vendor”
- “Monitor and reduce how long to rectify rejected e-Bills if the e-Billing team can make the corrections”
- “Monitor and reduce how long to rectify rejected e-Bills if other business units have to make the corrections”
Of course, the reporting statistics mentioned earlier can also be used as key metrics to monitor the effectiveness of the service.
Final thoughts; the use of internal audit reports
While this article has looked at KPI-led reports that will measure the effectiveness of the firm’s e-Billing service, there are other types of reports that will assist the teams in minimising errors on e-Bills in the first place. For example, the firm’s e-Billing team can run audit reports on a client by client basis to check that the expected data is present before the matter is billed and there should be processes in place to refer many of these issues back to the business to resolve. Another report that can be invaluable is for all new matters that require e-Billing to be notified to the legal and e-Billing teams. This will help ensure that there are “no surprises” at bill generation time and that all parties know that an e-Bill is required. Ideally the new matter “take-on” team will be able to produce such a report.
Poor performance on KPIs could be the catalyst for implementing such processes, but it’s best practice to do these reports, as it will deliver a better client experience. You can learn more about these audit reports in my pre-flight checks for law firms article.