Author: Onit

The mantra that “the billable hour is dead” has long been spoken about within legal circles, and the reasons for its survival and forecast demise have been the subject of many debates. Still, despite being “unloved” by most clients and subjected to significant pressures for many years, time-based billing has refused to die. Those involved in legal billing on a day-to-day basis still see this method as the primary billing arrangement for most legal work completed by mid-size and large commercial law firms. Their corporate clients have grumbled about the billable hour for years, and alongside other factors, it receives blame for high rates of burnout and stress in the legal profession. Many agree that charging by the hour is inefficient and non-transparent, yet it remains the mainstay of how most law firms charge clients for their work.

Here, we will look at why organizations still use the billable hour, what other ways law firms can charge for their matters, and what is holding back firms and clients who want to embrace alternative fee arrangements. Although many in-house legal teams ask their law firms to suggest different ways of charging for their services, we believe that hourly billing will continue to be part of a wider portfolio of methods.

What is Time-Based Billing?

Before looking at different charging models, we should review what hourly billing means and how it has such a firm place in the charging of legal services. Historically, the charging for legal services by the hour is not that new, especially considering how long lawyers have existed. In fact, before the 1950s, lawyers based their fees on considering such things as the nature of the matter, an agreed scale of costs, and/or the ability of the client to pay. However, from the mid-1900s, time recording became widely used, initially to monitor efficiencies within the law firm and review whether work was profitable. From then onwards, time recording increasingly became the way to bill clients.

With the advent of computerized time and billing systems in law firms, lawyers began to record their time in (mainly) six-minute increments – or multiples of this – (i.e., 0.10 of an hour) along with a narrative of the work done and often a code to define the task/activity undertaken. This is multiplied by an hourly rate to give a cost or charge for that item of work. In addition, many US and UK firms utilized time recording software designed to capture activities completed by lawyers exclusively based on their time spent completing that work.

This focus on time makes it difficult, if not impossible, for firms to capture the value of the work based on any other measure. The current legacy PMS (practice management systems) are not flexible enough to offer, manage, and track different fee arrangements.

Why is Hourly Billing Still the Dominant Charging Method?

Management Reporting. As well as recording lawyer efforts based on time spent, legal practice management systems produce reports for senior partners and the finance function to show the productivity of the fee earners and the chargeable work undertaken. Often US, Canadian, and UK law firms (in particular) have focused on resources, billed hours, and cost recovery rates. Targets, budgets, and rewards get set by reference to the time expected to be charged and paid for by the client.

Time and value. Generally, law firms are traditional organizations and have developed cultures that often expect fee earners to spend long hours in the office. Employees intuitively understand that to receive a reputation as hard workers, they must put in the time. Whether this “time equals value” culture will change post-Covid, and what the recent working-from-home experience has shown will have to be seen.

Reward structures. For many firms, there is a belief that “the more you bill, the more that you are worth.” When linked to legacy billing systems and the focus on time, this has often led to fee earners being rewarded according on how much work they do, or instead, the hours spent doing it. This will inevitably lead to a belief that hourly rates and the billable time spent on the work are essential, if not vital, to success.

What Are the Alternatives?

Some commentators have said that it is misleading to talk about “alternative” charging methods, as though hourly billing is the “norm” and anything else is an alternative to this. In fact, we should probably include hourly billing alongside other methods of charging for legal work – as some of these methods existed long before organizations used time-based billing.

Fixed Fee Arrangements

One increasingly used billing method is described as “Fixed Fee.” This is when the law firm and the client agree to a fixed fee for a piece of work and where both the client and the law firm accept an element of risk for any cost variances. This charging method is oft used for repeated transactions, where the amount of work done does not vary too much, and both parties are comfortable with the agreed fixed fee for every transaction. In this case, cost differences (either lower or higher) are shared between the client and the law firm and accepted as a low business risk.

Fees Based on Value

Another method of charging comes based on the value the client believes it will gain from having the work done – and if the law firm agrees to deliver this work, either advice, documents, or a transaction, for the “value” given to it by the client. This solution does rely on a good working and trusted relationship between the parties and a discussion taking place before the work commences. It also depends on both parties agreeing on what the delivered “end product” looks like and should involve a process for any changes to be resolved along the way.

Caps and Extended Fees

A further model now used is for the law firm and client to agree on a fixed or capped sum to be paid for the legal work done over a given time period – often 12 months. Again, both the law firm and the client accept a degree of risk for any changes over time, but the client has the benefit of the certainty of quality legal advice being available for a known cost and the law firm the certainty of fee income for a year.

Hybrid Charging Method

Finally, there is the hybrid charging method – which is part time-based and part fixed fee. Ideally, the law firm will use the standard UTBMS (Uniform Task-Based Management System) phase/task codes to identify the initial stage(s) of a transaction where time-based billing might be appropriate and can scope the rest of the work needed to complete the matter. Both parties can agree upon a fixed fee. Electronic invoicing (e-billing) lends itself to this model – where both parties can easily see and agree on the work done and at what phase or stage of the transaction it applies.

Onit’s European legal spend management solution BusyLamp can fully support all the current methods of charging for legal work. Whether the law firm is importing their work-in-progress and invoice information as LEDES (Legal Electronic Data Exchange Standard) files or submitting their data directly into the system for the client to review, the product works with hourly billing, fixed fee, or any of the other models in use. In addition to the traditional e-billing functionality, the solution provides a comprehensive range of features to the legal procurement and billing process, and this includes support for the request for proposal, matter budgets, resource planning, matter project management, and in-depth reporting. Click here to learn more.

Conclusion

Many people working in the legal world believe it is unlikely that time-based billing and the billable hour will ever completely die out but that there will be a revision of this billing method from being the primary method used to the acceptance that it is just one of many. As clients look for different approaches to billing and more innovative fee arrangements grow, partners of commercial law firms need to meet these demands. Interestingly we may see a return to the pre-1960s approach to client billing, specifically, to one where lawyers use a more client-focused or value-based approach and consider the client’s requirements. Using newer technical solutions, including AI, machine learning, workflows, and advanced data analytics, will help us move away from the billable hour and towards fixed fees, value charging, or capped prices.

Request a demo of BusyLamp eBilling.Space today.

Easy-to-use, clear, and comprehensive reporting functionality has evolved from a bonus to a must-have requirement for corporate legal teams evaluating legal technology. The pressure on legal operations to demonstrate improvements and return has led to reporting features being almost as important as the fundamental benefits of the software tool in use.

Using legal spend management software, out-of-the-box spend reports and user-friendly analytics wizards allow legal departments to monitor work in progress, measure actual spend, and forecast budgets accurately.

Organizations can analyze data across variables such as matter type, jurisdiction, or timekeeper seniority within a spend management tool. Legal operations use this data to decide improvements to ensure legal is contributing towards the business reaching its objectives. Such tactics borne from using data in this way include:

• Making better matter resourcing decisions
• Negotiating discounts
• Getting more value from firms
• Making the business case for hiring more internal staff

However, Legal Operations miss a trick when data analysis from a particular tool is used in isolation. This means that it is critical that Legal Operations look at reporting insights in combination with political, economic and regulatory information from the market sector. For example, legal spend budgets can become distorted during periods of significant regulatory change or through an uplift in litigation and/or regulatory investigations, creating outliers to regular activity. A clear view of how the underlying legal spend is trending for normal business-as-usual activities (based on matter types) will help the decision-makers support any budget changes. For example, when the European data protection regulation GDPR came in, many companies would have seen an increase in their legal spend as they sought advice to implement the new rules, thereby increasing their legal budgets.

Combining Legal Data for Better Risk Management

Where the in-house legal function is working closely and in partnership with the business units across the company, the range of information and data it holds will often put it in a unique position within the organization by having a holistic view of what is going on across the company. This data supports an awareness of what the business is doing and forms part of the historic corporate knowledge built over the years, such as previous contracts, decisions, and outcomes. Historically, this information was not in a structured electronic format, which meant any form of data and trend analysis or knowledge management was very manual and time-consuming.

With the increase in legal matter management, legal spend management solutions, and better document search and retrieval, there is a growing need and clamor for data processing, analysis, and knowledge management. Capturing basic contract terms and/or details of legal opinions in a matter management system provides a very simple knowledge management tool and a rich source of data. Other tools that will help provide data are solutions to create standard contracts, access to benchmark reports, and internal resources (finance reports, etc.).

The legal operations teams seeing the most value combine data from various technology tools to take their strategic input to the next level. One such area, which is of massive importance to the entire business, is the management and mitigation of risk.

A legal operations team that is carrying out data analysis on all the data at its disposal will be able to identify trends that will lead to a range of questions that should spark further debate, such as:

• How much work gets done in-house versus being sent externally?
• Are the correct processes being followed?
• Is the right level of technical support given for the type of transaction? Is there a change in the fee arrangements used?
• Is there growth in the types of transactions at a business unit or country level?
• Is one firm being used more than others for similar transaction types from a particular part of the business / legal team?
• How does the firm perform against others for similar transactions, both in price and performance?
• How does the business differ from market peers?
• What is required to manage a specific regulatory change?
• Are the in-house legal function and its staff compliant with the relevant regulatory authority guidelines, such as the Solicitor Regulation Authority (SRA), etc.?

Below are some examples of how the answers to these questions could demonstrate a change in the risk profile and appetite.

By monitoring the volumes of work, the type of work, who is doing it (in-house lawyers, external lawyers, or a combination of both), the time taken, the costs, etc., the legal operations team can better advise on the organizational design, support, and management of the legal function as well as the risk profile and the risk appetite of the legal function and in some instances the supported businesses. Comparing this data to benchmarks would highlight variances that help support any decisions.

A better understanding of the work (and who is doing the work) will help ensure that the legal function stays properly resourced and is not taking on activities better placed in other parts of the organization and that the appropriate processes, controls, and procedures are in place. This might cover such things as law firm engagement and/or payment of invoices by appropriately authorized individuals within the legal function. For the legal function and its in-house staff, this might include ensuring that they comply with the rules of the governing bodies such as the SRA, NALP or the Federal Bar Association in Germany.

A lack of the appropriate technical support (whether from work done in-house or by external law firms) on deals could lead to drafting errors and/or incorrect advice distributed, potentially leading to greater exposure to legal risk. For the more complex arrangements, it would be normal to see more senior lawyers engaged in the matter.

Spotting an uplift in a particular type of work (such as litigation) or activity (such as drafting) could indicate a lack of understanding of the contract terms within the front-line business areas who are requesting contract changes, bad working practices, poor standard documentation, or changes in the markets and/or economic climate (each of which also presents opportunities). Legal operations teams can help to mitigate these by highlighting trends and ensuring that the legal function:

• Delivers better training and communication to the business,
• Carries out regular reviews of standard documentation,
• Supports reviews of policies, practices, and procedures, and
• Develops a better understanding of the market.

Consistent use of one firm over others should raise questions. They may be competitive in price or have the appropriate skill sets. When analyzed against performance and cost, this may become self-evident, but if not, there may be other reasons to be investigated. As part of the legal operations team’s vendor management program, they should ensure that the firm maintains the right skill sets for their work, as this will help mitigate legal risk caused by a lack of technical knowledge and support.

A significant move to fixed fee arrangements with law firms is beneficial if a) both parties are clear on what activities should be covered, by whom, and when, and b) confident that the agreed pricing is fair and balanced. However, suppose the firm is not providing any supporting timekeeper activity data. In that case, it becomes difficult to know whether the firm is providing the proper technical support and whether the fee structure is still fair and balanced. A legal operations team can help ensure that the legal function obtains the best fee arrangements through regular firm reviews and enforcing governance of the billing rules. They can also ensure that the firm is providing the proper technical support for this type of work, as this will not be evident from the invoice data.

Capturing brief details of the contract terms and using software to create standard term contracts will allow the legal teams to identify contracts impacted by new regulatory changes. An example of this is the proposal from the Bank of England for banks to carry out climate change stress testing. Due to this regulation an awareness of the type of contracts and contract terms will become more relevant. A legal operations team that can quickly pull this information together can help support the business by ensuring the scope of work is understood and adequately resourced.

With the increase in cyber security and greater scrutiny by regulators who are starting to require more rapid, robust, evidence-based reporting, the need for greater use of these solutions is becoming more prevalent to avoid compromised data and eventual fines. Understanding what data goes to which supplier helps ensure that those suppliers have appropriate controls to manage that information in line with Information Governance and Records Management policies and procedures and that any breaches get promptly reported.

It is also worth noting that a lack of data in the legal systems is equally as insightful as it will show where parts of the business and/or legal function need to follow agreed practices and procedures. Using data from the legal spend management solution will help identify where within the organization external legal costs have been incurred and with whom, which can assist in building an awareness of the use of external legal support and potentially close any gaps or tighten any controls. Furthermore, using “gap” reports in the legal systems helps identify problems within the data that will distort any data analysis.

For legal operations teams to deliver process improvements and efficiencies, ensure compliance with policies and regulatory requirements, optimize their spend and manage risk, they should analyze the available data from all the data sources at their disposal. As they start to analyze all their data, instead of analyzing point solution data in isolation, they will begin to discover new trends and insights not previously seen or understood.

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Many law firms of all sizes are now generating their legal bills in electronic format, submitting them through a legal spend management system with an e-billing function 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 monitor how well the function performs.

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 organization and structure, technical considerations, available resources, and even which clients are asking for their bills to be delivered this way. However, it is essential for law firms to know how efficient and effective their processes and procedures are for dealing with this critical business area. Inefficient processes will lead to a backlog of bills waiting to go to the client, rejected and repeatedly rectified, delays at various stages, and ultimately an impact on cash flow – all of which leads to unhappy clients and partners.

The Aspects of E-Billing That Every Law Firm Should Measure:

Who needs to know how well the e-billing function is performing? Who are the interested parties? Usually, there is no “owner” of e-billing in a law firm, and many business areas will be interested. The e-billing stakeholders include the firm’s lawyers, the relationship partner, revenue controllers, finance staff, the e-billing team, the 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 period can we take the measurements to allow for like-for-like comparisons?

Support the Law Firms E-Billing Function

The following section will explain how to develop reports and associated monitoring tools to support the e-billing function and provide helpful information to the stakeholders.

E-BILLING TRACKING APPLICATIONS FOR LAW FIRMS

Many law firms have developed an e-Bill “tracking” application for internal use, which can provide status reports on e-Bills processed and other key information items. The tracking application, which can be spreadsheet based, will provide high visibility of e-Bills processed and analyze bills rejected, the reasons, the fixes required, and who is responsible. The person responsible (usually the e-billing coordinator) should update the tracker in as close to real-time as possible.

This “tracker” tool can pair with the invoice return form 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 legal spend management system of the client. Used correctly, the tool will formalize the feedback process and help teams to manage their workloads. It will also help prioritize e-billing requests and protect the e-billing team from responding to “the last and loudest” user request.

REPORTING ON E-BILL REJECTIONS

At the basic level, lawyers need to know if a particular e-Bill is successfully uploaded and approved for payment by the client. If 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 the e-billing team resolve it? Address this by having a formal online “invoice return” form that e-Bill uploaders can use to notify the relevant function of rejected invoices and the expected resolution. A law firm can use this form to formally record rejected e-Bills, where they are sent for resolution and the outcome, rather than rely on phone calls, e-mails, etc. It will also 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 critical 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 (ideally, this will be trending toward zero over time). For example, the solution is able to 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 percentage 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.

FURTHER METRICS AND KPIS THAT SUPPORT THE E-BILLING FUNCTION

A reasonably simple indicator to measure effectiveness would be “Bills received by the e-billing team this week” (value and number) and “Bills uploaded to legal spend management software.”

However, it is more beneficial to take this analysis further and provide a detailed breakdown of the e-billing process. For example, every month, a report can show the number of e-Bills received by the e-billing team with their monetary value and the percentage of the total e-Bills for some (or all) of these categories:

• Bills uploaded to the legal spend management 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 authorization
• Bills authorized for payment

Other reporting metrics can focus on critical highlights (e.g., Five new clients expected to go live this month), named clients (e.g., Why does client XYZ have a high percentage of bills awaiting authorization?), and action points for the week (e.g., Focus on missing time narratives with this particular legal team).

There is no 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 to better manage their workload. Consider the use of graphics and a dashboard. This makes consuming and understanding the data easier, especially when identifying trends and changes over time.

How to Set Goals/Targets for 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 cooperation from the revenue and legal teams. The law firm management must support this and ensure that other business units comply with the objectives.

However, some helpful 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 xx % over the next month.”
• “Monitor and reduce how many e-Bills do not have the required mandatory fields present before uploading them to the legal spend management system.”
• “Reduce days taken from bill generation to loading into the client’s e-billing software”
• “Reduce times e-Bill is rejected after being loaded to the bill acceptance by the vendor.”
• “Monitor and reduce how long it takes to rectify rejected e-Bills if the e-billing team can make the corrections.”
• “Monitor and reduce how long it takes 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 service’s effectiveness.

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, other types of reports will assist the teams in minimizing 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 billing the matter. There should be processes to refer many of these issues back to the business to resolve. Another report that could be invaluable is for all new matters that require notification of e-billing 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 is best practice to do these reports, as it will deliver a better client experience.

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Note: originally published in the German-language legal tech publication “Legal Tech Verzeichnis.” Translated here.

In a challenging economic environment, Legal — like all departments — faces increased scrutiny for operational and cost efficiencies. Metrics are vital to showing Legal’s value to the organization — and Key Performance Indicators (KPIs) are a potent tool to demonstrate the department’s importance.

As detailed in a recent PriceWaterhouseCoopers survey, organizations of all shapes and sizes worldwide face an increasingly worrisome economic environment. The combination of global conflict, aftereffects of the pandemic, new rules and regulations, and a persistent wariness about economic foundations make for a business world defined by uncertainty.

The result of this environment? A new focus on operational and cost efficiencies throughout every department of the organization. Legal is no different. An optimized, streamlined legal department can help fuel growth in trying corporate times. The current environment provides Legal with a sterling opportunity. Per the 2022 Enterprise Legal Reputation (ELR) report, Legal can “materially impact” the organization by bolstering revenue, improving sales negotiations, and increasing efficiencies — evolving beyond its traditional role as the “protector of the business” and into a material business partner.

The challenge for Legal? The value of a legal department is mainly known to the organization anecdotally; traditionally, it’s been tough for organizations to quantify the impact of Legal on the business. In a data-driven world, this puts the legal department at a disadvantage.

Metrics drive departments, and for Legal to be recognized as a direct, material contributor to the enterprise, it needs numbers to back that assertion. That’s where key performance indicators (KPIs) come in.

How KPIs Drive a Modern Legal Department

KPIs are measurable values that indicate how well an organization is achieving its strategic or operational goals. KPIs that demonstrate how Legal is optimizing its processes include:

• Total outside counsel spend
• Spend by law firm
• Legal spend as a percentage of revenue
• Budget-to-actual total spend comparison (e.g., percent handled within budget)
• Outside expense versus in-house
• In-house lawyers versus revenue
• Cost per matter
• Matter staffing
• Spend after implementing billing compared to spend without

When used effectively, KPIs demonstrate the legal department’s value and enable it to make data-driven decisions to improve efficiency. However, remember that you can’t manage what you don’t measure. To use KPIs, you need an effective means to collect and measure them, including technology. That’s what an enterprise egal management (ELM) solution can provide.

Using Enterprise Legal Management Solutions to Track KPIs

For KPIs to work for a legal department, you need an ELM solution to provide real-time access to critical metrics or data. Here’s how they can help:

• Cost savings. A legal spend management capability provides insights into where the department spends its budget, allowing you to find out where to achieve cost savings — for example, by reducing outside counsel spend, streamlining legal operations, or renegotiating rates.
• Matter management. Track key matter management metrics, including case volume, time spent on cases, and outcomes; with this, you can identify trends and areas for improvement (e.g., reducing cycle times, improving settlement rates, and increasing win rates).
• Vendor management. Help track vendor performance, and get insights into vendor cost, quality, and timeliness to discover your top-performing vendors, negotiate better rates, or terminate underperforming vendors.
• Compliance: Track legal compliance metrics — such as regulatory compliance, internal policy adherence, and risk mitigation — to ensure the department meets compliance requirements and identifies areas where additional training or policies may be needed.
• Team productivity: Explore team productivity metrics, such as workload, time spent on administrative tasks, and team utilization; discover areas to streamline processes or find where to utilize team members better.

Another benefit of adopting ELM software? Over time, the solution creates a database of historical matters and associated spend, arranged int Uniform Task Based Management System (UTMBS) and Legal Electronic Data Exchange Standard (LEDES) codes. From there, you get powerful analytics and insights into legal spend that can inform data-driven decision-making.

Armed with enterprise spend management software that tracks KPIs, your department gets the valuable information it needs to contribute to business goals and achieve year-over-year improvements — and become that driver of value and savings for the company rather than just a “cost centre.”

The Seven Golden Rules of KPI Implementation

Ready to get started with KPIs for your legal department? Before you begin the project, remember these seven golden rules of KPI implementation and use them as your guide:

1. Start now. Don’t wait. Begin your KPI project now with existing data instead of delaying the implementation.
2. Align with strategy. Make sure the KPIs are in sync with overarching corporate and department goals.
3. Customize. Use KPI lists as inspiration — but tailor them to your company’s needs.
4. Collaborate with stakeholders. Engage with all needed stakeholders in the KPI development process to secure alignment and buy-in.
5. Keep it simple. Don’t develop too many KPIs or bring in complex metrics that are difficult to measure or understand. Simplicity should rule.
6. Be realistic. Set realistic targets. Ensure KPIs are challenging yet attainable based on historical performance and industry benchmarks.
7. Look for continuous improvement. Regularly review and update KPIs to keep them relevant and effective in driving business outcomes.

By keeping these seven golden rules in mind as you develop your KPIs, your legal department can get the robust metrics it needs to quantify its value to the organization and take its place as a direct, material contributor to the enterprise.

As discussed in part 1, the 90s and 00s saw many barriers to widespread adoption of legal e-billing software. With many of these huge logistical stumbling blocks overcome by changes in legislation and developments in software, the last decade has seen more legal departments mandate their law firms to use e-billing so they can better manage spend, budget accurately, and make strategic matter resourcing decisions.

Another driver of this uptake has been the transformation of the legal market in general, such as increased pressure on legal departments to actively reduce spend, or at least demonstrate value from their expenditure. Previously, because of the nature of the legal department’s role, all costs were perceived as necessary to protect the business. This attitude has gradually changed and, like all departments in a business, legal is also expected to operate successfully and more efficiently – hence the rise in legal operations.

Legal spend management software, and the process of e-billing, is essential in managing and controlling legal spend. Although it carries a cost, it more than pays for itself in what it can save the department. However, the traditional, on-premises solutions were cost-prohibitive for all but the largest corporate teams and would not deliver ROI unless legal spend was huge. Although in-house teams understood the benefits, they couldn’t justify the investment.

This prevented the growth of legal e-billing. The rise of cloud-based SaaS solutions lowered software cost, opening legal spend management to more corporate teams and driving faster e-billing adoption throughout the market. The addition of new vendors in the market introduced a competitive element that facilitated faster improvements in the features available to corporate legal departments and their law firms. Additional functionality means that the potential benefits of using legal spend management software are much improved vs. 10 or even 5 years ago, and at a lower cost too!

The demand for legal e-billing software from in-house legal departments meant most law firms had no choice but to embrace truly automated e-billing systems (or face doing it manually…) which means at many firms, e-billing is now fully integrated into the normal billing routines, which means that there is less manual intervention and therefore the costs associated with e-billing are lower. Ideally in these firms there will be validation of time recorded, codes, narratives, rates, timekeepers, and expenses earlier in the billing process; e-bill production will be integrated into the firm’s time and billing system; and there will be checks for compliance with client billing rules before the bill is finalized. These law firms are now much more on the front foot, have well defined processes for on-boarding new e-billing clients, have support for e-billing in client/matter inception and time-recording systems; and their lawyers, secretaries and back-office staff are comfortable with e-billing requirements and processes. They are seeing strategic benefits to e-billing in the same way their corporate counterparts do.

However, it is not necessarily the large global law firms that have led the way in e-billing. In the UK, successful legal e-billing implementations have taken place in several smaller niche firms as well. As corporates move away from the traditional panels of global law firms and increasingly rely on smaller or niche firms, these firms have had to embrace e-billing to stay competitive. The key success factor that marks out these firms is their ability to integrate e-billing into their normal business routines. These firms have changed their internal processes to support the move, have trained all their staff in what is needed to make e-billing work, and made key changes to their systems to support the technical requirements.

They are now able to deliver electronic invoices to their clients in a cost-effective and efficient manner, with a low percentage of billing errors and are now sharing the benefits of e-billing software with their clients.

Latest Legal E-Billing Trends

Although e-billing is yet to be adopted by every legal department or firm, the fact that a large proportion have been using legal e-billing for over a decade is driving exciting developments in the industry as the legal market demands more innovation and further value from e-billing as a legal spend management enabler. Start-ups and developments at existing vendors mean some of these innovations are already possible, though none are embedded as business as usual throughout the industry. Over the coming years, we’ll see development and latest legal e-billing trends in the following areas:

• Collaboration. With the basic processes ironed out, the focus is moving onto optimizing these processes and making them more collaborative. Vendors are investing in improved interfaces between law firm and corporate systems to improve the experience for the law firm (whose e-billing interface is typically sub-standard compared to the in-house teams’), allow admin and set-up tasks to be distributed more flexibility or evenly between firms and in-house so the workload is shared, improve in-software communication and collaboration, automate more processes, and reduce manual effort.
• Work in Progress (WIP) Tracking. With conventional e-billing the client only sees the information at the bill stage, by which time it is too late to challenge any problematic entries and the invoice gets rejected. Despite the growth in fixed-fee arrangements, hourly billing is still common and in-house legal increasingly need to see matter costs and resource staffing in a timely manner for better visibility of matter budgets and status. Interestingly, many law firm systems already hold detailed real-time information on live matters and can retrieve this, “at the touch of a button.” For those that don’t, tools like BusyLamp enable clients to ask their law firms to submit WIP. Thus, the in-house team can see, review, and query this information in a timely manner and avoid surprises and difficult conversations when the invoice arrives, building a better and more trusting relationship. This transparency is also useful for both parties in validating the value of fixed-fee arrangements.
• Managed services. As in-house teams strive to achieve even more ROI from their legal spend management solutions and reduce the cost of low value work, we will see increased outsourcing of the invoice review process itself to vendors and legal service providers so in-house counsel and their external lawyers are spending more time on legal work.
• Artificial Intelligence (AI). Advancements in AI and machine learning will allow more of the e-billing and matter management process to be accurately automated. This and other improvements in automation will in turn make e-billing more integrated into a firm’s day-to-day case management, time recording and billing processes and make it the “normal” way to bill with lower costs. AI is not a magic button though; a substantial volume of good quality data is essential to begin using AI.
• Integration. One of the perennial issues with e-billing has been how to get different software systems to speak to each other and this is compounded by the fact that law firms are at different stages of development and/or using multiple systems. The big international firms are still out in front, having heavily invested in global billing and management information systems. There is now work underway to define a standard set of software tools to facilitate a direct interface between the law firm’s time & billing system and the client’s preferred e-billing vendor system. Put simply, this could potentially remove the requirement to output a free-standing file of invoice and other legal data and then manually upload these files to an e-billing vendor application.
• Platform solutions. Combined matter and spend management solutions are common and some also support integration with contract or document management applications. The trend is towards a single platform to manage the full lifecycle of legal work to prevent having to log-in to multiple systems to do a day’s work. Legal spend management solutions will continue to expand beyond just the process of e-billing to include sourcing/RFP, WIP, reporting, panel review, rate comparison and other “beyond e-billing” functionality that is found in tools such as Onit’s European legal spend management solution BusyLamp eBilling.Space.