I am writing this article specifically for law firm billing managers and clerks who use ELM Solutions such as Tymetrix, CounselLink, Legal Tracker etc., for invoice submission.
I want to share with you some easy to do but powerful steps to get your invoice approved without any reductions and paid quickly.
There’s a general perception that the objective of the client’s billing guidelines is to control/reduce legal costs. If you continue to believe so, then you are wrong.
Clients are increasingly focusing on obtaining business intelligence to help them perform well in the market. Almost all the top ELM providers are also enhancing their data analytics capability to serve their clients better.
Clients no longer see electronic invoices as an alternate for PDF or paper invoices. They are now recognized as one of the greatest source of data.
By 2020 the use of ELM solutions are expected cover 50% of the market.Gartner: Magic Quadrant for Enterprise Legal Management
This would mean your job is going to be more demanding in the coming days.
I want to cover each steps along with the underlying reasoning and rational so that you get the compelling reasons to implement them.
So, it’s gonna be a long read, but worth it.
I promise you, these steps will enhance your compliance level and get your invoices paid faster.
Step 1 – Prepare a consolidated billing guidelines reference sheet
The job of a billing clerk often turns difficult and complex when the firm is dealing with multiple clients and multiple billing guidelines. However, by keeping these billing guidelines handy the job of a billing clerk (sometimes the attorneys as well) can be made more efficient.
In order to keep the billing guidelines handy in an effective way, please follow the following steps:
- Create a spreadsheet with the following columns
- Client Name
- Name of the Billing Guideline
- Guideline Heading
- Guideline Notes
- Section Reference
- Approval Requirements
- Approving Authority
- Receipt/Supporting Document Requirement
- Review each billing guidelines carefully and extract the relevant information to complete the spreadsheet
- Paraphrase the language into simple plain English wherever required
- Enable filtering options on each column of the spreadsheet
- Update the spreadsheet as and when required
- Ensure to keep this file open in your desktop while you are working
Ideally this is how your reference sheet will look (could be better than this 😉 )
Now you have one of the most important referral materials to make your job easier and effective.
Every time you are working on an invoice for a particular client, start your work by filtering that particular client’s name on your spreadsheet. This will ensure that you are looking at the correct billing guideline.
Most of the billing clerks who have followed this method have been successful in avoiding errors and achieving better compliance.
Trust me, in my experience I have seen some of the experienced billing clerks also make mistakes while dealing with multiple invoices.
I strongly recommend preparing and using a consolidated billing guidelines reference sheet.
Step 2 – Set up alerts to know when to invoice your clients
You will find terms related to billing frequency in most of your clients’ billing guidelines, especially if your clients deal with voluminous litigation on a regular basis.
Typically, clients will set billing frequencies depending up the nature of the practice areas. This will vary between one and three months.
One of the key reasons behind clients setting such billing frequency is to help them plan their financials better to meet the expanses.
If you submit invoices without complying with this guideline, your client can withhold your invoices at the payment stage of the workflow.
You can create calendar alerts for each case as per the billing frequency required by your clients.
Most of the law firm practice management software have a calendaring function. If you have one with such calendaring function then you should set up your alerts with that calendar. You can also consider Outlook or iCal for setting alerts. Google Calendar is my personal favorite.
Sending invoices as per the billing frequency requirements will help avoid any potential for your client withholding your invoices.
Step 3 – Ensure that the hourly rates applied are consistent with the agreed rates
Typically, in a panel law firm environment, the client would determines the timekeeper hourly rates and provide these rates according to the timekeeper’s designation, PQE, Practice Area and Location.
However, certain clients allows law firms to provide the hourly rates of each timekeepers in the ELM platform for client’s approval.
For most of the ELM software, timekeeper rate validation is one of the most basic functions and the system will immediately capture any inconsistent rates applied in the invoices.
If you submit invoices with hourly rates that are higher than the approved rates, then your client’s ELM system will automatically reduce those rates to the agreed rates.
Your options will be to either accept the reduced rate or update the hourly rate in the system and then appeal against the reduction. Trust me, this is a time-consuming process.
Complying with this billing guideline often turns to be complex in a multi-client multi-billing guidelines environment. But you can avoid this hardship by keeping a consolidated timekeeper rate sheet.
Please follow the below steps to prepare the rate sheet:
- Create a list of timekeepers in a spreadsheet along with their year of qualification, designation and billing code (if any).
- Review each billing guidelines and determine the applicable hourly rates for each timekeeper.
- Add additional columns for each clients and the respective practice areas and enter the applicable hourly rates.
Your timekeeper hourly rate sheet should look something similar to the below image.
Similar to the billing guidelines reference sheet, I strongly recommend keeping this file also open in your screen while you are preparing invoices.
Step 4 – Ensure that each invoice line entry contains the correct UTBMS Activity or Expenses Code
I hope you are not wondering what’s UTBMS.
Most of the billing clerks are aware of these codes; however, they do not use it much in their regular job.
ELM platforms accept electronic invoices in LEDES format and LEDES invoices requires data included in the form UTBMS Activity and Expenses codes.
There are two major reasons why clients would want law firms to use appropriate UTBMS codes in invoices.
- To enable appropriate utilization of the ELM system validations for invoice compliance
- To obtain meaningful data to enable data analytics to generate business intelligence
When it comes to invoice validations, the UTBMS Activity and Expenses codes play an important role.
ELM software are increasingly enhancing its AI and Machine Learning capabilities. A considerable amount of invoice audit validations have now become automatic. These validations have a direct correlation with the codes utilized in the invoices.
Below is a classic example for how AI and Machine Learning directly impacts the legal bill review process.
Utilizing wrong UTBMS code can result in the ELM system flagging your invoice.
Let me explain the above point with some simple illustrations.
In most of the billing guidelines in-firm communications among timekeepers are non-billable tasks.
Assuming you have included a time entry for in-firm communication in your invoice. The algorithms in the ELM system will immediately flag this entry as non-billable task. Here the source for the system validation is the UTBMS activity code in the line entry i.e., A105.
Here you can accept the reduction and finalize the invoice.
Let me give you another interesting example.
In most of the billing guidelines communications with outside counsels are billable tasks.
Assuming you have included a time entry for communication with outside counsel. However, instead of using the activity code A107 you have used the code A105. In this scenario, though you have billed a billable task because you have utilized a wrong code, the system will automatically flag this line entry.
Here, you can make an appeal against the line entry reduction and reinstate the same.
Keeping aside the automated validations by the ELM system, even in a manual review environment also you are running the same risk.
For example, if the invoice entry reads as “call with John to discuss about deposition”, it would be difficult for a bill reviewer to understand whether the call is an in-firm communication or a communication with the client or others. This is when a reviewer will take help from the UTBMS Code utilized to determine the nature of the billing entry. See below
- A105 – Communicate (in-firm)
- A106 – Communicate (with client)
- A107 – Communicate (other outside counsel)
- A108 – Communicate (other external)
So, if the communication is with an outside counsel which is a billable task but if you have used the code A105 then the reviewer will rely on the code and reduce the billing entry as non-billable in-firm communication.
One of the common outcome of each illustration above is that they all have the effect of delaying invoice finalization and payment.
Hope you are able to see the importance of utilizing accurate UTBMS codes.
Now, how to fix this issue?
Most of the law firm billing software are capable of picking and allocating a suitable activity and expense code based on the description written. Some of these tools provide the flexibility for the billing clerk to edit or modify and apply the appropriate codes, some do not.
If you do not have the function to alter these codes then you should strongly consider enabling this function in your billing software.
You will save a considerable amount of time in your invoice payment cycle by fixing the UTBMS codes prior to submitting invoices.
Step 5 – Modify all the block billing entries into itemized individual line entries
It has been a common practice among law firms to stack all the related tasks into a single line entry. Clients also used to allow this but not anymore.
Sometimes law firms take effort to insert specific times for each tasks within a block billing description e.g., “Legal research on . . . (0.5); drafting of . . . (0.5).”
Law firms often argue that because the line entry description includes time split for each tasks, they should not be treated as block billing.
Clients no longer buy this argument.
You need to understand the reason behind clients discouraging blocked billing.
According to studies “block billing “hides accountability and may increase time by 10% to 30%.”
Between 10% to 30% inflation in bills?
No, wonder why clients are strict about avoiding block billing.
Another important reason is block billing entries have the effect of reducing the quality of the data and its ability to deliver data analytics to the clients. This is because an invoice line entry will allow only one UTBMS code corresponding to one activity or expense.
So, if you are using a block billing entry, which code will you apply?
Are you able to see the issue here?
As explained earlier, invoice validation and data analytics has a greater dependency on the UTBMS codes used and by block billing you are defeating one of the key objectives of the clients in implementing ELM platforms that accepts LEDES invoices.
In addition to the foregoing, block billing often results in bill reviewers simply flagging the entry only because it is not compliant with the billing guideline.
Let me explain this with an illustration.
It is a standard term among most of the billing guidelines that travel time should be billed only at 50% of the total travel time.
Assuming your invoice line entry reads as follows:
“Travel from El Paso to Dallas and attend witness testimony of John Doe | 5 hrs”
Now, will you be able to decide whether travel time billed at 50% of the total travel time or 100%.
Here, unless you know the time taken for attending the testimony, you will never be able to determine whether the travel time is billed at 50% of the total travel time or not.
In a scenario like this, you are leaving the bill reviewer with no options but to flag the invoice and wait your response.
Can you see how block billing entry will directly affect the invoice payment cycle.
You will be wasting a huge amount of time unnecessarily to giving explanations to your clients.
Avoiding block billing will significantly improve your invoice payment cycle.
Step 6 – Ensure adequate descriptions for each line entry
Similar to block billing, when invoice line entry descriptions are not adequate it will cause hardship for a bill reviewer and your invoice will be flagged.
When I say “adequate description”, I mean to say a descriptions that is detailed enough for a bill reviewer to understand the nature of the activity or expense and the reasonableness of the amount billed.
Below is an example of one such adequate description.
“Travel from El Paso to Dallas by flight to attend witness testimony | 1 hr”
With a billing entry like this, a bill reviewer will clearly be able to determine the purpose of the travel, mode of travel and the reasonableness of the time billed for the travel.
Line entry descriptions should focus on the nature of the task performed but it need not go to the extent of disclosing all the confidential information.
Let me explain this with some examples:
“Call to client | 0.5hr”
In this example, the description is insufficient because with this description, a bill reviewer will not be able to determine the nature of the call and the reasonableness of the time billed.
“Call to client to summarize the strategy for MSJ | 0.5hr”
Here the description is sufficient for a bill reviewer to determine the nature of the call as well as the reasonableness of the time billed.
“Call to client summarizing the strategy for the MSJ. Considering the review of the evidence . . . . Therefore, . . .”
In this example, the description is way too broad and in fact, it is giving away too much of confidential information. This will unnecessarily consume the time of the bill reviewer.
Adequate invoice line entry description will help avoid a considerable amount of invoice reductions.
Step 7 – Include approval details and attach supporting documents
This one also falls within the category of passing the adequacy of description test.
A bill reviewer flagging invoices for not finding references to approval requirements and/or not finding the required supporting documents is one of the most common reasons why your invoice payment could be delayed.
Generally, billing guidelines provide that items such as motion practice, engagement of experts, out-of-state travel expenses etc., require prior approval from the client.
In my observation, failure to include details of the approval and attaching necessary supporting documents has been one of major reasons for delayed invoice payment.
In most of the case (more than 90%), law firms are successful in making appeal against such reductions and reinstate them. However, the appeal process under this category would be more time-consuming than others for a number of reasons.
If the lead attorney have failed to take prior approval from the client then he/she needs to seek retrospective approval of the same from the client. This is not an easy task. Sometimes such approval will come only after the request passing thorough multiple levels of hierarchy within the organization.
If the lead attorney have taken prior approval from the client but failed to pass the same to billing clerk then the lead attorney needs to locate and pass the same to the billing clerk.
After receiving the required approval and the supporting documents, the billing clerk needs to make an appeal against such reduction in the ELM system.
Trust me, having to do such appeal process would be the most unproductive way of using your time.
You could have avoided this entire trouble by checking the invoice line entries and fixed them prior to submission.
If you are able to check the line entries at the time sheet stage itself, that would be great.
Following this step will save a considerable amount of time in your invoice payment cycle.
Step 8 – Check whether paralegal tasks are billed by paralegals; If not, modify the rates to paralegal’s rate
This is one of the most complex areas of invoicing where you have a high likelihood for having your invoices flagged; if not carefully billed.
Most of the billing guidelines provides a generic rule that only paralegals should be used for performing paralegal tasks and attorney for attorney tasks. It further provides that, if an attorney performs any paralegal tasks then those tasks should be billed only at the paralegals’ rate.
This will become little challenging during invoicing. In most of the cases, attorney will end up performing certain paralegal tasks only because they are comparatively easier for the attorney to perform than to assign it to a paralegal.
Based on the timekeeper’s time sheet the billing system would automatically apply the attorney’s rate for all the tasks including the paralegal tasks.
You need to have the technical flexibility in your billing software to modify the rate applied and apply a paralegal rate.
Alternatively, if the tasks performed sounds like a paralegal tasks due to lack of adequate description, then you should edit the description to make it sound more as an attorney task.
Step 9 – Check for any overhead, administrative or secretarial tasks in your invoice and remove them
“A lawyer may not charge a client for overhead expenses generally associated with properly maintaining, staffing and equipping an office.”ABA Opinion 1993
This is a well-established rule and law firms generally do not add their overhead to their client’s invoices.
Its a common practice among most of the law firms to invoice clients for certain overhead items that can be specifically allocated to that client’s matter e.g., conflict check, secretarial tasks, local calls, local travel etc.
This practice is acceptable to certain clients and unacceptable to others.
In the context of reducing invoice payment timeline, you should just follow the applicable billing guidelines and avoid all the non-billable items from your invoices.
In my experience, I have seen most of the clients classifying the following items as law firm’s overhead items:
- Conducting conflict check
- Preparing budget estimation
- Preparing invoices
- Local calls
- Local fax
- Local postage
- Local travel
- Legal research subscription charges
- Secretarial staff time
You will able to identify these items from your consolidated billing guidelines reference sheet. Remove them from your invoices.
Step 10 – Submit invoice only after ensuring that the invoice value is within the approved budget estimate
Submitting invoices at a higher value than the approved budget could result in your invoice being stuck at the approval stage for a longer period.
Clients require law firms to provide budget estimate because it helps them plan their legal spend accordingly. This is one of the most important aspects of litigation management and any noncompliance here would mean financial hardship to the client.
Your client will be left with no other options but to withhold your invoice.
In order to overcome this issue you need to set up certain monitoring systems in place to know where your invoice value stands when compared with the budget.
You will be able to check your budget estimate in your clients’ ELM system. Alternatively, you can use your practice management software to monitor the same. If you are going to use the latter option then you need to treat the approved budget estimate in your ELM system as your trust or retainer amount and update the same in your practice management system. (Please note that this is just a suggest alternative method. You should treat this only as a budget monitoring mechanism.)
If you are able to connect the data between the time sheet and the budget for the litigation then you will be able to set up these kind of monitoring system using tools such as spreadsheet.
Setting up such monitoring systems are comparatively easier when it comes to a budget for the entire life of the matter. However, if the budget is set at a phase level of the litigation then you need to set up these monitors at a little more granular level.
Your level of understanding and knowledge of UTBMS phases will be the key here in setting up such monitors.
Step 11 – Use an invoice submission checklist
Trust me and follow the checklist.
All the steps shared here are coming straight from my experience.
As an operations head of a large legal bill review team, I have had the opportunity to work with over 6000 law firms across the US. Alongside conducting legal bill review, I had the responsibility of providing resolutions to law firms on invoice reductions related disputes.
During this period, I have had interacted with a number of billing managers, billing clerks and sometimes with the lead attorneys. I had the firsthand experience of facing the frustrations of law firms over delayed invoice payments.
More than 90% of the delayed invoice payments were due to law firms not complying with the client’s billing guidelines.
I had a number of law firm approached me asking guidance and tips to help being compliant with the billing guidelines. Amazingly, these law firms achieved great results within the next couple of months. Their invoice compliance level improved tremendously and their payment cycle reduced by between 50 to 75%.
So, if your firm is still struggling to get their invoices paid on a timely fashion or struggling to avoid invoice reductions; then you should try these steps (and share your feedback as comments).