As a corporate legal department, you understand the importance of managing legal spend and making informed business decisions. You rely on business intelligence to help you collect and analyze data, identify trends, and optimize your legal department operations.
But what happens when the data you collect is inaccurate or incomplete?
This is a real concern when it comes to block billing, a practice that is all too common in the legal industry.
In fact, the impact of block billing on data analytics can be significant.
Lumping all tasks and activities together into a single charge makes tracking spend, identifying inefficiencies, and comparing costs across matters impossible.
It is important to recognize that block billing is not just about bill padding. It has a broader impact on your legal operations and can limit your ability to gain insights from your legal spend data.
By preventing block billing and promoting appropriate utilization of detailed UTBMS activity and expense codes, you can better understand your legal spend, identify areas of inefficiency, and improve your legal operations.
Why Block Billing Creates Bad Data and Prevents Valuable Analytics
As we’ve discussed, block billing makes it difficult for us to assess the accuracy of charges and determine which tasks are compensable.
But there’s another significant impact that block billing has on your ability to produce meaningful business intelligence: it creates bad data.
To illustrate this point, let’s take a look at the following example:
- 10 hours billed for “work on case”
This is a classic example of block billing. As you can see, there’s no way to determine how those 10 hours were actually spent.
Were they spent on research? Drafting documents? Attending meetings?
Without this information, it’s impossible to draw any meaningful insights from the data.
It’s like trying to solve a puzzle without all the pieces.
Now, let’s say the law firm instead provided a detailed breakdown of those 10 hours with an appropriate narrative description:
- 4.50 hrs | “Conducted legal research on relevant case law and statutes regarding the admissibility of evidence in response to the plaintiff’s motion in limine.”
- 0.50 | “Reviewed and analyzed the plaintiff’s motion in limine and supporting documents to identify weaknesses in their arguments and potential areas of challenge.”
- 0.80 | “Drafted and revised a response to the plaintiff’s motion in limine, incorporating legal research and analysis to support the arguments and evidence presented.”
- 1.00 | “Participated in a conference call with the client to discuss the response to the plaintiff’s motion in limine and provide updates on the case.”
- 3.00 | “Traveled to the client’s office to meet with them and review relevant documents and evidence in preparation for the response to the plaintiff’s motion in limine.”
- 0.20 | “Phone call with paralegal to discuss work instructions for the upcoming response to the motion in limine.”
With this breakdown, we can start to see patterns emerge.
For example, we may notice that the lawyer has spent minimal time drafting the response but has billed a significant amount of time for the “legal research,” “meeting with the client,” and related “travel time.”
This could be an opportunity for the client to build a case law repository of similar cases to help reduce the research time and encourage firms to utilize communication and conferencing technologies such as Teams or Zoom to avoid unnecessary travel.
But when block billing is used, we lose these valuable insights. Instead, we’re left with a pile of meaningless data that tells us nothing about how to improve our legal operations.
And it’s about more than just improving legal operations – bad data can have serious consequences for decision-making.
For example, let’s say the client is considering whether to settle a case or go to trial. If the billing data is full of block billing, it will be impossible to accurately determine the costs of going to trial versus settling. This could lead to a costly mistake in decision-making.
In summary, block billing creates bad data that prevents clients from gaining valuable insights and making informed decisions.
Clients and law firms must prioritize detailed, accurate billing to produce meaningful business intelligence.
The Impact of Block Billing on LEDES Invoices and UTBMS Codes
One important reason to steer clear of block billing is so that we can perform meaningful data analytics.
We rely on the UTBMS codes used in LEDES invoices to analyze the cost of legal services. These codes break down legal services by task and activity, making tracking legal spend, budgeting, and comparing costs much easier.
Using UTBMS codes, you can get a detailed understanding of your legal spend, identify areas of inefficiency, and keep tabs on trends in the types of services being provided.
This information can be used to negotiate better rates with your outside counsel and make informed decisions about when to bring certain tasks in-house.
For instance, we can analyze which tasks take up the most time and adjust our legal strategy accordingly.
On the flip side, block billing defeats the purpose of UTBMS codes, as it lumps everything together into a single charge, preventing you from seeing the breakdown of tasks and activities that make up the billed time. This makes it impossible to know how much time was spent on each task or activity.
This can significantly impact the quality of data analytics because it becomes tough to compare costs across matters, track spending, and identify inefficiencies.
For instance, imagine a client receiving an invoice with block billing for a litigation matter, including 20 hours for various tasks.
In this case, the client cannot know how much time was spent on each task or if any tasks were duplicated unnecessarily. Consequently, comparing costs across matters, tracking spending, and identifying inefficiencies become difficult.
On the other hand, let’s say the same litigation matter invoice is presented without block billing, with detailed UTBMS codes for each task, showing that 10 hours were spent on document review, 5 hours were spent on witness preparation, and 5 hours were spent on motion drafting. This information can be used to identify areas where costs can be reduced, such as document review, which appears to be taking up a disproportionate amount of time.
To sum up, block billing prevents clients from gaining valuable insights from their legal spend data, making it difficult to analyze costs, identify inefficiencies, and make informed decisions.
That’s why we need to avoid block billing and use detailed UTBMS codes to help clients better understand their legal spend and improve their legal operations.
Strategies to Achieve Meaningful Data Analytics in Legal Spend
Now that we have discussed the negative impact of block billing on your ability to produce meaningful business intelligence let’s talk about some recommendations to prevent block billing and obtain quality data.
To prevent block billing and obtain more quality and meaningful data, we should consider taking the following steps:
- Include block billing as one of the important attributes while evaluating law firms’ performance: Clients should make it clear to their law firms that block billing is unacceptable and will be taken into account when evaluating their performance. The more block billing entries there are, the lower the score the firm will receive.
- Reject invoices with block billing in their entirety: Clients should consider rejecting invoices with block billing in their entirety and ask the firms to resubmit the invoice with appropriate itemized line entries. This practice will help ensure that the data is accurate and that clients are not paying for non-compensable tasks.
- Educate the legal bill review team and in-house counsels about the importance of business intelligence: Clients should pass strict instructions to their legal bill review team and in-house counsels not to encourage allowing block billing. Clients should educate them about the benefits and importance of business intelligence and how block billing practices impact them.
As clients, you should prioritize quality data to produce meaningful business intelligence and work with your law firms to ensure that invoices are itemized, and that block billing is avoided.
By implementing the above recommendations, you can prevent block billing, obtain more quality data, and gain valuable insights into their legal spending.
