Friend or Foe?
What you should know about the
newest trend in legal billing.
By Brett Burney
September/October 2005 Issue
Just as e-mail has
become an electronic replacement for a pen and paper note, electronic
billing, the paperless automation of sending the bill to a client, is
becoming an alternative for generating a detailed paper invoice. Most of
the time, however, no real bill actually is sent. E-billing is more of a
process for sharing data between a law firm and a client. If your firm
is not submitting electronic bills, chances are you are using some kind
of software to generate bills before printing them out on paper and
snail mailing them to the client — an extra and unnecessary step.
E-Billing for the Customer
As with many of the technologies inspired by the Internet, e-billing is
full of claims promising efficiency, faster payment and seamless
integration with current practices and software. And while there are
many success stories, there are just as many frustrations that bog down
Legal Technology Association (formerly LawNet) 2004 E-Billing Survey
reported that 99 percent of the responding law firms were using some
sort of e-billing process. Thirty-six percent had between one and five
e-billing clients, 44 percent had between six and 15, and 20 percent had
16 or more. The numbers have risen throughout the past few years, and
they will continue to rise in the future.
The single most
important reason law firms embrace e-billing is because clients demand
it. This type of request from a client should be easy enough to handle.
After all, they pay the bills and the legal team should accommodate them
whenever and however
even a cursory examination of today’s customary e-billing practices
reveal a multitude of glorious advantages for clients, with minimal
benefits for law firms. Instead, the lion’s share of the burden is
placed on law firms.
When an e-billing
system or relationship is established, clients immediately enjoy the
blessings of improved efficiency and detailed oversight of legal bills.
Before e-billing, a client easily could spend hours or even days
laboriously combing through paper invoices and bills. With e-billing
they can generate a myriad of reports and statements based on electronic
data submitted by the law firm with the click of a mouse. This allows
clients to swiftly pinpoint questionable charges and irregularities that
might easily have been overlooked on paper bills.
Is It for Everyone
One might suspect that only larger clients and larger law firms have to
succumb to e-billing, but it’s creeping into all levels of the legal
world. Even corporations that have a single attorney on staff are
drooling at the efficiency boosts they see from e-billing. Not only does
it help them better manage
the various outside
law firms that invariably work for the company, but corporate counsel
now can generate streamlined reports that show a chief executive officer
or a director’s board exactly where money gurgles out the door on
extravagant legal fees. Likewise, big and small firms are skeptically
exploring the elusory world of e-billing. Bigger firms obviously enjoy
more help in the form of fully staffed accounting and technology
departments, but e-billing has become a way for small firms to stand out
from their ominous competition.
That brings us to the
most pressing issues that law firms struggle with in e-billing — expense
and resources. Contrary to the nirvana-esque promises of e-billing as a
way to save time and cut costs, most law firms lament that their
experiences are just the opposite. To understand this requires a quick
jaunt into some techno mumbo-jumbo.
Would You Like a Code With Your Standard?
In the conceptual days of electronic billing and electronic data
exchange (officially known as Electronic Data Interchange), several
people worked to create a set of standards upon which all e-billing
could be based. Standards are important to effective communication as
illustrated in proper sentence structure.
For example, if I use
the sentence, “I want soup,” everyone immediately understands what I am
saying. But if I do a Yoda-like twist and blurt out, “soup want I,” you
can figure out what I am saying, it just might take your mind an extra
second or two to juggle the sentence into the proper flow. Our
conversations and literature are understood more easily when we follow a
set of consistent, acceptable standards.
The same theory can
be applied to e-billing. In 1994, the American Bar Association along
with PricewaterhouseCoopers released a series of billing codes called
the Uniform Task-Based Management System that provide consistent
identifiers for billing descriptions. These codes were intended to
provide a standard way of referring to timekeeper tasks so everyone
immediately could recognize exactly what kind of work was done for a
particular project. UTBMS codes are still used today.
However, when clients
started receiving invoices with UTBMS codes, they arrived in a variety
of formats. While the codes made sense, there was not a standard way of
transmitting or delivering the information. So in 1998,
PricewaterhouseCoopers helped develop the Legal Electronic Data Exchange
Standard. LEDES provided law firms with a standardized format in which
to output their billing data to clients, regardless of the time and
billing software they used. This obviously made clients happy because
they could receive LEDES-formatted invoices from all of their law firms.
This, in turn, allowed them to compare pricing and services line for
Thorny Issues in the E-Billing Rose Garden
One easily could imagine that the story of e-billing could conclude
after that last paragraph. If everyone agreed on the codes to be used
for legal activities, and everyone agreed on the formatting of the
invoices, we all could live happily ever after in the perfect world of
e-billing. But alas, clients discovered the LEDES format could be
tweaked to suit their own eccentric needs and started insisting that law
firms do so. And since they were the clients, there was not a lot of
pushback. Law firms have been generating all kinds of custom invoices
and bills for clients throughout the years. One client might want
something a particular way, while another client might insist on
something totally different. Each client has individual expectations.
This trend didn’t
change when e-billing came on the scene. In the ILTA E-Billing Survey,
only 36 percent of the firms reported they had to deal with only one
format for their invoices. Thirty-three percent used two formats, and
the rest of the firms had to deal with three or more formats (with 10
formats being the highest).
This means someone at
64 percent of the responding law firms has to look at each invoice that
is generated and determine if the format needs to be tweaked before
sending it on to the client. One law firm said the actual submission of
the bill then becomes a manual process, requiring someone in accounting
to manipulate the data into the desired format. This is a far cry from
the original idea of an automated e-billing system.
Some firms say
e-billing actually adds time to their billing process rather than
streamlining it. However, others say the firm does get paid quicker once
a correct bill is properly submitted.
Time Spent on Billing
E-billing also has an impact on timekeepers, most notably attorneys and
legal assistants. Some legal professionals don’t know or care much about
how e-billing works and are content to let the billing department worry
about those issues. Many firms’ timekeepers detest e-billing because it
requires them to keep track of their time according to the rigid and
structured UTBMS codes. While this usually can get worked out between an
attorney and his or her secretary, some firms actually open up their
e-billing systems to legal assistants, who can go in and edit
descriptions of legal work to make sure they properly fit within the
UTBMS codes. This takes the heat off the billing department, which might
not have as good of an understanding of the work that was done for the
All of this extra
work — whether it’s being done by billing clerks, secretaries or legal
assistants — means resources are being used for nonbillable work. Time
that paralegals have to spend on tweaking client bills is time they
can’t use for other billable projects. On the other hand, when a client
demands that a firm e-bill them, what does a firm say? It’s hard to
refuse a client request.
Bill Me for the E-Billing System
Firms also must consider the cost of setting up and maintaining an
e-billing system. All e-billing systems vary in cost structures for law
firms. Some cost nothing for the firm, some charge annual fees, and
others keep a percentage of the fees billed.
Serengeti Law (www.serengetilaw.com)
is recognized as a leader in the e-billing industry and doesn’t charge
law firms for anything. Instead, the companies that purchase the service
bare the cost. This might sound a little backward, but Serengeti is a
complete matter management system that includes a robust e-billing
piece. Corporations and companies using Serengeti gain a clear advantage
in using the sum of the available features. All that law firms have to
do is log on to Serengeti’s Web site and upload invoices for clients.
This works great if your clients are already set up on Serengeti, but
they might not be too keen on you suggesting they invest in a whole new
system, so you might be better off setting something up in your firm
charges law firms an annual fee based on the number of clients a firm is
currently billing. TyMetrix (www.tymetrix.com) charges firms a
percentage of the fees that they bill.
As you can imagine,
the initial setup of any of these services can take time, just like any
major implementation of technology or change of process will do in a law
firm. The costs in time don’t end there. Once a law firm is set up to
e-bill clients, the ILTA E-Billing Survey reported that setting up one
brand new client on the e-billing service required an average of 76
hours of work and an out-of-pocket expense of $711. The survey reported
the average time a firm spent on preparing and delivering an electronic
invoice was 55 minutes. Even then, the survey reported 19 percent of the
invoices had to be resubmitted with more people taking additional time
to find and fix the problems.
All three of these
e-billing services mentioned are leaders in the field, but deciding
which vendor to use certainly demands time devoted to research to
discover the best system for the firm and the clients. If a client
already has Serengeti, the firm doesn’t have to do much to get up and
running on the system. And while DataCert or TyMetrix might bring
additional costs to a firm, the fact that you can offer an effective and
operational e-billing alternative to your clients might add a welcome
feather to your reputational hat.
Is There Any E-Hope?
At this point, you might be wondering why anyone would voluntarily elect
to go down the road of e-billing. However, as stated before, you and
your firm might not have a choice. If you are not already e-billing at
least one corporate client, you could be doing it soon.
There are a few
things you could do now to be more proactive in the e-billing arena.
Many legal professionals don’t have time to do additional research over
and above their legal work, but a little preparation is better than
First, it’s important
to at least be conversant on the topic of e-billing. Know the major
players and vendors in the industry and have a general idea of what they
offer. This way, if you have an opportunity to be involved in the
selection of an e-billing vendor — whether with your firm or a client —
you will be ahead of the game.
Second, make sure you
are familiar with a client’s e-billing needs. It’s easy to think that
e-billing should be done by the accounting department, but it only
reports what timekeepers give it. It’s important for the timekeepers
themselves to be aware of how to properly invoice their time and UTBMS
codes so there is less work on the administrative side — both at the
firm and for the client. In this respect, you could become the
“champion” of e-billing at your firm or the “go-to” person when
attorneys and other legal assistants need help with entering their time
properly. The more you can talk about the benefits of e-billing, the
easier it will be for people to believe in your vision.
Once you have people
on board the e-billing wagon, it potentially could become a marketing
tool for your firm. If your firm can confidently handle an e-billing
request, or even help a client set up an effective e-billing system,
your firm could earn high marks, and a lot of respect. And that is what
it’s all about anyway — making sure the client is happy.
Once an e-billing
system is up and running, it’s imperative that all staff members are
trained how to adequately bill time and be consistent. Things change and
even a small change could evolve into a big problem if electronic bills
are repeatedly returned.
It’s also important
to have the client trained. The closer a member of your firm’s
accounting department can work with clients on their e-billing systems,
the stronger the relationship with the client can become. Look at it
from the perspective of helping them, rather than having to conform to
their e-billing requests.
Don’t Fear the E-Bill
Even with all of the issues and
hurdles that swirl around e-billing, it’s inevitable that your firm will
engage in some type of e-billing system in the near future. Why would
any client want to continue to accept bulky paper invoices when they can
be set up to streamline the process on the computer, and gain valuable
insight into a law firm’s billing practices? From a client’s
perspective, e-billing is a big win. And while law firms might still be
struggling to come to grips with the new technology and innovative
demands on their “old way” of doing things, they will succumb because
the client will demand that they do so. Woe to the law firms that refuse
to change, and praise to those that boldly take on the e-billing
challenge and rise to the occasion.