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Most legal invoices still get submitted

the old fashioned way, on paper. But

some corporate law departments are

beginning to request that outside counsel law

firms submit their bills electronically. Is electronic

billing just the latest fad, or is this an important

new trend both law firms and law departments

should carefully consider?

Early users of electronic billing include

most of the major insurance carriers. In the

past year, however, we have seen electronic

billing initiatives move well outside theboundaries of repetitive or commodity legal

services so often associated with insurance

defense work. This has included major pieces

of bet the company legal work being

performed by AmLaw 100 law firms, where

invoices must now be submitted to the

corporate client electronically.

How Does E-billing Work?

Most of the electronic billing vendors offer

four core components to their service/system.

These include:

1. Audit capability for the invoice being sub-

mitted. Essentially this means the corporation

can filter a law firms bill to ensure that:

arithmetic calculations are accurate

expense reimbursement rules are

being followed

outside counsel guidelines are adhered to

only approved timekeepers are working

on the matter

hourly rates reflect the agreed upon

fee arrangement

2. Workflow/Routing. Once an invoice passes

through the audit module, it is electronically

routed to the appropriate in-house lawyer(s)

or administrative staff to review, approve

and pay.

3. Reporting/Benchmarking. Once invoices

are approved they are stored in a database.

The database can then be queried for trends,

analysis and metrics, and benchmarks can

be applied against the data.

4. Integration with other systems. Integration

of e-billing systems with matter manage-

ment or corporate accounts payable

systems is common.

Implications for Firms

Electronic invoicing is no longer relegated

to a handful of early adopters. Law firms

therefore need to understand how e-billing

works and leverage any benefits that might

exist for them from it. Law firms should begin

by considering the following:

1. Make sure your financial accounting

system can produce a LEDES 2000 bill.

LEDES is the industry standard data format

for electronic exchange of legal invoices.

Most good time/billing vendors can now

produce a LEDES 2000 bill.

2. Target litigation work first. By its very

nature, litigation matters fall into distinct

phases and tasks. This makes coding of

time entries easier. The American Bar

Association has defined industry standards

for litigation known as the ABA Uniform

Task-Based Codes. In some instances the

corporation may have slightly modified the

ABA codes.

3. Expect your litigators to learn the ABA

codes and phases. This may seem like an

unfair expectation at first, but have you

ever met an internist or medical specialist

who didnt know precisely which codes

insurance companies paid for during a

doctor visit? Medical services were codified

by insurance companies in the late 80s and

early 90s and every doctor knows those

codes by memory. When legal invoices are

not coded correctly, they are rejected by the

Online Billing: Submitting LegalInvoices Electronically

By David G. Briscoe

Law firms

need to

understand

how e-billing

works and

leverage any

benefits that

might exist for

them from it.

David G. Briscoe

January 20034

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2/2January 2003Report to Legal Management

e-billing system. It is obviously in

the best interests of the law firm to

have lawyers code the time entry

correctly from the beginning.

Some time and billing vendors

offer time entry screens that assist

the lawyer in using the codes

correctly. A few even disallowcertain words or phrases in narra-

tive descriptions for codes that

dont encompass that activity.

4. Request access to the benchmark

data. Over time the corporate

purchaser of legal services will

build valuable metrics and bench-

marks about your lawfi

rmsperformance and efficiencies.

Request that information be shared

with your law firm. You want to

be able to see how your firm

compares to other law firms

performing similar legal work.

Access to this information can help

you identify where opportunities

exist to improve legal service

delivery and where you excel

relative to the competition.

5. Dont ignore transactional work.

Transactional legal work is more

difficult to codify but is not fully

exempt. Even the ABA has had

difficulty defining and agreeing on

phases and tasks for transactional

legal work. Industry agreement on

standards has therefore not

evolved as quickly. Certain types

of transactional work, however

bankruptcy, real estate, and

immigration are receptive to

e-billing efforts due to their

repetitive nature.

Benefits to the Corporate

Law Department

The potential upside for corporatelaw departments is significant.

Corporate law departments have

three primary roles: 1) to know

the business better than outside

counsel, 2) to alert business execu-

tives to risk and help them manage it

and 3) to control outside counsel

legal spending.

It is that third role controlling

costs that e-billing addresses, and it

can add strategic value to a law depart-

ment with significant outside counselspending. The benefits include:

1. Audit capabilities for invoices.

Paper-based legal bills never lent

themselves to quantitative analysis

by in-house counsel. And third

party legal auditors often created

an adversarial relationship with

outside counsel firms. E-billing

allows the corporation to define the

degree of scrutiny applied to a firm,

a lawyer, a class of cases or everycase. It enables in-house counsel to

measure everything from gender

and racial diversity of lawyers

working on a case to how a firm

staffs and conducts depositions.

2. Streamlined process / Reduced

paper flow. Paper-based invoices

are not only difficult to analyze,

they get lost, get photocopied

much too often, take up valuable

filing cabinet space, are difficult to

find at a later date, etc. Efficiencies

are gained not just by eliminating

the paper but also by improving

the process of paying an invoice.

3. Lower costs. E-billing vendors

marketing literature suggests the

internal cost of paying a single

legal invoice ranges from $40 to

$50. They claim to be able to reduce

that to less then $1 per invoice.

Although this is most likely an

overly optimistic estimate, its still

worth noting that improving the

process can result in significant

internal cost reductions.

4. Metrics, Metrics Everywhere! As

pressure on General Counsel from

the Board of Directors, CEO or

CFO increases to control legal

spending, metrics will only

become more important to law

departments. The challenge for

many corporate law departments

is defining valid metrics for legal

services! Truth be told, not many

in-house counsel even know where

to begin. Requiring outside counselto submit bills electronically is a

great place to start, but its only

the first step of an ongoing

process that will need constant

fine-tuning.

Electronic billing can benefit both

buyer and seller of legal services.

While some e-billing initiatives are

promoted as vehicles for partnering

or faster bill payment, to date few

law firms have realized those typesof benefits. Electronic billing certainly

provides for closer scrutiny of outside

counsel invoices, but for law firms

that already adhere to agreed-upon fee

arrangements and billing guidelines,

that is not a problem.

Great service and high quality

always get noticed. E-billing now

creates the opportunity to demon-

strate the value and efficiency of a

law firm in a quantitative manner.

That gives law firms a new opportunity

to differentiate themselves from the

competition, and law departments a

new method to objectively evaluate

outside counsel.

David G. Briscoe is a senior consultant

with Altman Weil, Inc. He can be

reached at (610) 886-2000 or

dgbriscoe@altmanweil.com.

E-billing now creates

the opportunity to

demonstrate the value

and efficiency of a law firm

in a quantitative manner.