The Need for Work in Progress Transparency
While eBilling has brought new transparency, control and clarity to the billing process for the in-house client, one criticism of “conventional” eBilling is that the client is still not able to see the time and expenses being charged by their external law firms until the final invoice is sent (whether that is a draft or an engrossed version).
It is apparent that clients want to be able to see the work carried out and the associated costs during the life of the matter itself, and be able to query or even reject items early in the billing cycle. This is necessary for accurate cost control, forecasting, and avoiding invoice surprises. This WIP (Work in Progress) information has long been the subject of discussion between clients and law firms. Until fairly recently, firms have only been able to provide rough estimates of accruals – usually at the end of each month – without any level of detail.
Some of the key areas that a client will typically want to monitor are:
- Cost overruns against budget / forecast.
- Large amounts of a single type of activity (e.g. research, drafting etc.).
- Wide date ranges between the work being carried out and the time/fees being submitted to the client.
WIP Reporting is Beneficial for Law Firms
The BusyLamp legal spend management solution, eBilling.Space, includes WIP reporting as a key feature and BusyLamp has demonstrated that this adds an extra dimension to the relationship between clients and their external law firms. Some of the positives of WIP reporting for both parties include:
- The law firm adds value for the client in the form of enhanced billing data – over and above the provision of quality legal advice.
- The law firm has confidence that the work performed (so far) has been accepted by the client and there will be no push back when the final invoice is presented.
- The client has more certainty that the work is done correctly and in line with the billing guidelines. Detailed actual spend v budget can be monitored early in the transaction and through all its phases.
Challenges of WIP reporting for law firms
Despite these benefits, implementing WIP reporting is not without its problems and while some law firms have embraced the requests from their clients to provide timely and accurate WIP information, several law firms are still reluctant or unable to fully meet the WIP reporting requirement.
A common concern is that firms view the “raw” WIP information as being law firm data that the client should not see. Many of the large international firms have specialist revenue controllers working within the legal teams and closely with the deal partners. These firms also have well established billing processes, a key part of which involves revenue staff and partners reviewing the WIP for each matter before the bill is finalised. They will decide which items of time should be charged. More importantly, they will also check that time narratives are worded appropriately and are suitable for client view.
In most firms lawyers are advised regarding appropriate content for matter narratives, but there can be several hundred associates working on matters and it is impossible to “police” what they enter before the bill data is “cleaned up”. The firms are reluctant to go through this cleaning up process on the WIP data (even though it may be for a small number of bills) as partners see it as doubling up on work. Furthermore, no partner wants to be the first to allow a client to review WIP information in case it contains inappropriate content.
Another reason sometimes quoted by law firms for not wanting to provide WIP revolves around the timing and process issues associated with WIP information. More specifically, what are the consequences if the client rejects some or all of this information? Some firms argue that if WIP information has to be re-submitted then it may fall outside the acceptable time limits between the work being done and it being billed. These firms are often seeking to establish reasonable windows and processes for WIP review and resubmission in the event that any line entries are not approved.
A final objection is that to produce WIP files in the LEDES eBill format requires development work to be scheduled by the Finance/IT Systems team. Some firms have implemented manual work-arounds for supporting WIP submissions but this is not sustainable in the long term and for a growing number of invoices.
Overcoming WIP Reporting Challenges
eBilling vendors, clients and law firms have together come up with a number of compromises to address these challenges, which include:
- Line Item Narratives: If this is a concern, parties may agree to drop narratives from the WIP upload, or substitute them with holding text saying that the narratives will be on the final bill. If agreed, then the clients would at least get to see costs and the associated activity or expenses based on the LEDES code (e.g. communicating, drafting and so on).
- Billing Cycles and Accruals: The client can achieve similar output if the billing cycle is reduced to a calendar month, allowing them to have a view of that month’s work. Another option would be to improve the information supplied as accruals. This would not give all the time details to the client but would meet some of the requirements.
- LEDES Output Requirement: To address the concerns of law firms about possible additional IT development work, BusyLamp has developed two alternative methods that can be used with the eBilling.Space product:
- Firms can output their WIP information as an Excel spreadsheet, which can then be uploaded into the eBilling application as required by the client. As all law firms have access to Excel as standard and have staff who can use it, then the issue of needing expensive Billing system changes is minimised.
- AI functionality in eBilling.Space can extract non-LEDES-format, unstructured WIP data into reports that are meaningful and useful for the in-house client.
In conclusion, I (and BusyLamp!) believe that to have a successful WIP reporting implementation the client should engage with the law firm partners early in the process and discuss the requirement for WIP reporting. This should include why the client requires WIP and what they aim to achieve from tracking it. This will help to overcome some of the arguments put forward against providing WIP and help all parties explore suitable alternatives that still give the in-house legal department what they need to succeed.
Bryan King, January 2021