While e-billing has brought new transparency, control, and clarity to the billing process for in-house teams, one criticism of “conventional” e-billing 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).
The goal is 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 in-house legal teams and law firms. Until recently, law firms have only been able to provide rough estimates of accruals – usually at the end of each month – without any detail.
The key areas that an in-house legal team should be able to monitor to stay in control of its legal spend are:
- Cost overruns against budget/forecast.
- Counsel’s pre-billing time entries
- Large amounts of a single activity (e.g. research, drafting etc.).
- Wide date ranges between the work carried out and the time/fees submitted to the client.
WIP REPORTING IS BENEFICIAL FOR LAW FIRMS AND CORPORATE LEGAL TEAMS
Modern legal spend management solutions such as Onit’s BusyLamp includes WIP reporting as a key feature. It adds an extra dimension to the relationship between corporate legal teams and their external law firms. Some of the advantages of WIP reporting for both parties include the following:
- The law firm adds value for the client through 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 pushback when presenting the final invoice.
- The client has more certainty that the work is done correctly and in line with the billing guidelines. Detailed actual spend versus 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 has its challenges. While some law firms have embraced the requests from their clients to provide timely and accurate WIP information, several law firms still need to fully meet the WIP reporting requirement.
A common concern is that firms view the “raw” WIP information as law firm data that the client should not see. Many 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 crucial part involving revenue staff and partners reviewing the WIP for each matter before finalizing the bill. They will decide which items of time to charge. More importantly, they will also check that time narratives are worded appropriately and are suitable for the client’s view.
In most firms, lawyers get advice regarding appropriate content for matter narratives. Still, several hundred associates can work 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. What are the consequences if the client rejects some or all of this information? Some firms argue that if WIP information must be re-submitted, it may fall outside the acceptable time limits between the work done and when it gets billed. These firms often seek to establish reasonable windows and processes for WIP review and resubmission if any line entries are not approved.
A final objection is that producing WIP files in the LEDES e-bill format requires development work to be scheduled by the Finance/IT Systems team. Some firms have implemented manual workarounds for supporting WIP submissions, but this is not sustainable in the long term and for a growing number of invoices.
OVERCOMING WIP REPORTING CHALLENGES
E-billing vendors, in-house legal teams 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 approved, the clients would at least 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 view 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 in-house team but would meet some of the requirements.
- LEDES Output Requirement: To address the concerns of law firms about possible additional IT development work, Onit has developed two alternative methods used with BusyLamp:
- Firms can output their WIP information as an Excel spreadsheet, which can then be uploaded into the e-billing application as required by the client. As all law firms have access to Excel as standard and have staff who can use it, the issue of needing expensive billing system changes gets minimized.
- AI functionality in BusyLamp can extract non-LEDES-format, unstructured WIP data into meaningful and useful reports for the in-house legal team.
For a successful WIP reporting implementation, legal teams should engage with the law firm partners early in the process and discuss the requirement for WIP reporting. This should include why the in-house team requires WIP and what they aim to achieve from tracking it. It will help overcome some of the arguments against providing WIP and help all parties explore suitable alternatives that still give the in-house legal department what they need to succeed.
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