Leveling the e-Billing Playing Field – Eliminate “Haircuts”

By on September 4, 2011

The e-billing battle plays itself out every day. Corporate clients and insurance carriers look to “enforce” their billing requirements and law firms look to get paid for work done even though it may not fully meet requirements. Lawyers would prefer to just practice law, but it’s just not that simple anymore.

As Mark Herrmann, Vice President and Chief Counsel – Litigation at Aon points out in his article “Inside Straight: The Truth Behind E-Billing”, clients have the benefit of using in-house computers to analyze e-bills more  efficiently, determine items that do not meet the rules and make short pay the firm. He states, “When clients make those adjustments in the world of e-bills, the law firms are typically able to press a button and print a report of the disallowed charges”. The client has the benefit, in many cases, of specially designed e-billing software that spin- through thousands of time and cost entries and kicks out entries that don’t conform to the billing rules.

In my experience, many firms do not have the option of “press a button and print a report of the disallowed charges”. They instead just accept a 2-5% “haircut” on e-bills as the costs of doing business. Till now firms just didn’t have a way of easily scanning hundreds or thousands of bills going out each month for compliance to client rules. It’s not that firms want to send out non-complying bills, it’s just too difficult to manage complex rules on a manual basis.

The solution, automated rules! Law firms can use newly introduced technology to electronically “scrub” bills before submitting them to clients. A flexible rules engine can, just like the clients in-house system, spin- through thousands of time and cost entries and kicks out entries that don’t conform to the billing rules.

Bill Scrubbing technology can level the e-billing playing field and allow firms to submit “clean bills” and eliminate “haircuts”.

 

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Categories: Best Practices, Financial Management, Law firm billing, Management, Productivity, Technology

Ingenious Tips on How to Get a Client to Pay Faster

By on March 24, 2011

This week, I have a special guest blogger, CC Drummond of Lomurro, Davison, Eastman and Muñoz. I would like to extend my gratitude for CC’s contribution. If you are interested in being a future guest blogger, please email me .

Collecting payments for services rendered at a law firm can be tricky and sensitive.  You are asking for payment for an attorney’s time and knowledge and the client, regardless of the outcome of the case, is expected to pay. Retainers will establish the rates, costs, and any other stipulations pertaining to the case. The problem is, as the fees steadily rise, so does the anxiety of the client.

There are several ways to expedite the process of collecting:

  • From the moment a potential client walks through your firm’s door they should be warmly greeted. This starts the connection between the firm and the client.  The type of relationship that is established with the client, attorney and staff, can possibly effect payments down the line.
  • Once the billing begins, if not a contingent fee matter, monthly detailed statements should be sent with a return addressed envelope for payment.  Elaborate! For example, instead of just saying telephone call .20, one should enter telephone call with ( ) regarding ( ). If the entry is .20 the client is less likely to dispute it with the added information.
  • Pre-bills must be reviewed for accuracy. Clients might find fault in additional entries, even if only one had an issue. Resolve mistakes quickly; do not make the client call 2 or 3 times trying to get it rectified. It will only bring feelings of mistrust and possibly non-payment while waiting for issues to be fixed.
  • Accept all forms of payment: credit cards, debit cards, cash and checks. Many clients are requesting their bills be e-mailed. Once they have reviewed the statement they send back, via e-mail, authorization to debit their credit card.
  • More and more companies are requesting that their billing be sent electronically. LEDES-Legal Electronic Data Exchange Standard is the format that is required. Companies can use different sites, but the format is still the same. This allows the billing coordinator to see the status of their billing and when payment will be received. Be aware, some companies do take off a percentage of their fees to use e-billing.
  • Charging interest is also an incentive for them to pay each month. It doesn’t work with all clients. Some take that as a green light that they do not have to pay in full each month. It does help at the end of the case as a bargaining tool. This may give the client the impression that they are receiving a discount when they are actually paying for the services rendered.
  • Stamp invoices that have not had a payment in over 30 days “Past Due”. Call the client as soon as payments have a lull or have ceased altogether. Communication on a personal level might have a more positive result than an email or letter.
  • Offer a small discount for immediate payment in full. 

 After every avenue has been made available to a client and they still are not paying, you may let them know their matter is going to be sent to collections. Sometimes, that’s enough to get them to at least set up a payment plan.

I wish there was one ingenious way to get clients to pay, however, if you treat your clients respectfully and personally at a time when they are having difficulty, you are more likely to have a positive outcome.

CC Drummond is Senior Billing Coordinator for Lomurro, Davison, Eastman and Munoz in Freehold, NJ. CC has been with LDEM for 12 years and prior to her position with the firm she spent 10 years in the Air Force stationed in various countries around the world. In the spring and summer, CC enjoys spending time at the beach with her 16 year-old son and, in the colder months, enjoys reading, cooking and watching movies.

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Categories: Best Practices, Financial Management, Law firm billing

Corporate America …. want to lower legal costs, here’s how! (Part 2)

By on February 27, 2011

You hear it everywhere; companies want to lower legal costs. In my previous blog post I discussed the need to adopt standards. Law firms have a “hidden” high cost of e-billing because there is no single e-bill standard, there are hundreds or thousands of “standards”.

 Firms are delaying their billings, proof-reading every entry on every bill, submitting bills that get rejected or short-paid, and finally writing off a great deal of money. Corporations need to understand that all this is reflected back into law firm rates.

 Here is a simple way to fix this problem and lower costs to both firms and corporations:

  1. Quickly accept the current LEDES XML e-bill standard. The XML technology allows for tremendous flexibility for dealing with custom fields. Corporations should force the middle tier processors to accept this single standard. There won’t be a standard until the very top recipients of e-bills, primarily insurance carriers make the switch.
  2.  Work with Time and Billing vendors (or LEDES) to provide specific billing guidelines in an electronic format that the Time and Billing system can import and use for Bill Scrubbing. Law firms want to submit bills that fit your guidelines, but like e-bill formats, there are few standards. Time and billing vendors can provide tools to “scrub” bills if they had your guidelines in something better than just written documents.

 So, corporate America, do you want to collaborate to use technology to reduce costs for everyone involved?

 Your feedback is welcome.

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Categories: Best Practices, Financial Management, Law firm billing, Productivity, Technology, The Legal Market

Is e-Billing … a sinister trade-off?

By on October 3, 2010

Has it just become too hard to e-bill clients?

  Let’s look at some of the challenges:

  1. There is no standard e-bill format, LEDES 1998B is probably the best there is.  Clients have not adopted the LEXES XML format, despite years of effort to make it the standard. The 1998B format has loop-holes and almost every corporation has added customizations to it.
  2. E-billing submissions get disputed and results in a payment delay. An attorney has not been approved by the software, he’s approved alright, but the clients software hasn’t been updated.
  3. The audit software used by the client says “this work should have been done by an associate, not a partner”, the time entry is rejected. There is a “;” in the narrative, the entry is rejected.
  4. The current Phase codes, Task codes and Activity codes are not always easy to use, attorneys don’t always understand them. Wrong phase/task/activity code, the entry is rejected.
  5. Then there are the billing rules for each client, they won’t pay for this, that and the other thing. You need special advanced permission for a variety of day to day items.
  6. Did I mention that the firm submits the e-bill in a matter of seconds on-line, and waits, and waits and waits for payment, less all the disputed items, of course.

 What’s the real purpose of e-billing? To make life difficult, delay payment and lower legal expenses?

  It’s almost like a sinister trade-off.

 Since law firms charge incredibly high hourly rates and bill for everything under the sun  …  companies paying these bills require e-Billing, all sorts of codes and impose increasingly difficult billing rules.


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Categories: Best Practices, Financial Management, Law firm billing, The Legal Market

A Reason to Hate e-Billing – Backlash on the Study

By on September 12, 2010

So, you submit your e-bills each month, not that you have much of a choice these days. There was always an implied benefit that since the client received the bills electronically that payment would be made sooner, never happened. In the Law Department Survey Results-Analysis, Jane A. Bennitt reported that 69% of clients implemented a “float” as a way to delay payment to firms. (2008 Ebilling ILTA White Paper available here)

 Now we have the survey conducted by CT Tymetrix Inc., a company that audits law firm bills attempting to reduce legal costs, and The Corporate Executive Board Co., a company that provides research and benchmarks. This study was based on e-bills sent through the CT TyMetrix system by private law firms and was conducted from 2007 – 2009, in a major down economic cycle.

Survey Highlights (lowlights) include:

  • 85 percent of attorneys charge clients different rates for the same work
  • During the study Rates were up 21% in Dallas, Atlanta and Richmond
  • Things Corporations buy went up over 40% in the last 10 years, an hour of legal time went up 65%
  • Associate costs rose 17% between 2007 and 2009

The Bottom Line
Law firms will not be well served by reports showing statistics like those above. This isn’t to say that the numbers aren’t correct; it’s just how the statistics will be used. Keep in mind that every time you send your e-bills though an audit service you take the risk of having the “chunked-up” statistics both published and used to help further put your rates under pressure. Not that you have much of a choice!

 Don’t you just love e-billing, let me count the ways …….

Check-out the Law.com site for an interesting graphic showing some results of the survey.

Disclosure: I have not purchased the 92 page $4,500 The 2010 Real Rate Report™. The web site indicates that law firms agreed to allow their data to be used for this study once it was “cleansed”.


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Categories: Best Practices, Financial Management, Productivity, Technology, The Legal Market

E-Billing Let’s Law Firms Develop a True Costing Model

By on July 7, 2010

The 3 Geeks posted an interesting atricle titled:

The ‘Fuzzy’ Difference Between Case Management & Legal Project Management

One of the points made by Bruce MacEwen was that e-Billing was a great case management tool due to the use of task codes. I’d like to take this a step further and say that e-Billing allows a firm to finally determine a “cost” for providing a unit of service which can then be used to intelligently price future work.

E-Billing has been the overall driving force behind the use of task codes (including phase and activity codes) to quantify a discrete measure of legal service. The codes allow both a firm and client to finally dissect services down to tasks and sub-tasks levels with actual costs involved. The roll-up of thousands of tasks from many firms has allowed large corporate clients to model their exposure to risks and potential legal costs to resolve their issues. Unfortunately law firms for the most part have not seen the benefit of doing the same roll-up and modeling internally.

Law firms need to know their costs beyond grossed-up utilization and realization calculations. Most of the calculations done today at firms are merely compensation or firm profitability related. Knowing than an attorney has an “effective rate” of $320/hr. which is $50 less than his “standard rate” or that this attorney has a 95% utilization and 92% realization does nothing to determine the cost and later the profit of doing an actual task of work.

The development of a “cost” model will help a firm offer any type of Alternative Fee arrangement or bid new work. With enough data the firm will have a perspective on what tasks really cost them and how the roll-up of tasks can build a potential engagement model to price a competitive bid. The model will also help determine which attorneys are most cost effective at each task.

Here is a model that will help firms get started on first understanding the “cost” of doing work:

  1. Use task codes on every line of business within the firm, not just e-billed matters. Most systems let you build your own custom task codes sets that can match any area of law, try and get as granular as possible for each task or sub-task.
  2. Make the use of a task code mandatory for every billable time entry, most systems can easily do this. The specific task code set can be assigned to any client/matter for ease of use by the timekeeper.
  3. Let your system roll-up these, area of law specific task codes into a general set of standard tasks, so that you get a firm wide consolidation of common activities.
  4. Now you can start modeling the average and mean length of time for, say a deposition across the entire firm.  Let your system tell you that for 1,000 depositions the average billable time was 1.5 hours, the utilization (ability to get it billed) was 97%, and the realization (ability to get it paid) was 99%.
  5. Your system can then also further analyze the internal cost for each of these depo’s since we know how the attorney was for each time entry and we know the burdened or unburden cost for an hour of that attorney’s time.
  6. The average cost of a deposition is therefore; attorney true cost/hr . x the # hours required for the deposition.

Here are questions that can be answered:

  • Which attorneys are the most cost effective at certain tasks?
  • Which tasks are tough to make money on or are under-valued by clients?
  • Which types of cases (matters) are we the best at getting high utilization, realization AND are most profitable ?

The assumption is that you have a business intelligence database that will do most if not all of the heavy lifting here and that you gather enough data to make it statistically relevant to the costing model. This same process is what corporate e-billing clients have done on their end to model their cost of services.

Law firms that want to be relevant and competitive in the next decade must have a costing model to generate business as much as a profitability model.

For related information on costing models check out my blog post on June 2, 2010 “What Law Firms Should Learn from Manufacturing Companies”

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Categories: Best Practices, Financial Management, Productivity, Technology, The Legal Market
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