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Cover Letters on Client Bills – No Way

By on September 23, 2012

Law firms are under pressure to increase profitability and at the same time deal with stagnant revenue and increased costs. Improvements in productivity appear to be easier than rate increases in keeping a firm healthy.

I read with some disbelief a recent recommendation suggesting that attorneys send a personalized cover letters consisting of a paragraph or two with their monthly billing statements. The overall concept seemed understandable; just explain to the clients what you’ve done.

The idea of sending a personalized cover letter with each bill does nothing more than slow up the billing process, cost the firm cash flow and may allow the attorney to think that he/she is actually communicating with the client. The fact is, anything important the attorney needs to communicate to the client probably can’t be put in a general cover letter that passes through the accounts payable department in any case. In an efficient mid-size or larger law firm we want the accounting department to get good, clean bills out to clients for payment as soon as possible. Delays don’t benefit anyone, including the client. Can you imagine a billing attorney, who might be billing a few hundred matters (or more) each month generating cover letters for matters where he/she possible didn’t even do any work? Remember, we are hopefully using our billing attorneys to better manage projects and push work down to the lowest practical and competent level.

The client billing process, in many firms is based on a slow, painful monthly schedule. Why … because it’s always been that way and adding a cover letter to the front of a bill is not a step in the right direction. The firm might be better off setting up a policy that says a billing attorney must call a client, on every final bill after a matter has closed or any bill over $xxxx dollars to explain it personally to the client.

In summary, cover letters on bills really don’t serve the intended purpose and only delay the firm’s cash flow.

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

Survey – Wide Disparity in Billing Efficiency Causes Cash Flow Issues

By on May 28, 2012

In a previous post I revealed the details on a study I conducted to see how successfully firms were able to get attorneys to get their time in from the prior month. The results were not bad, 74% reported they had attorney time posted no later than the 2nd business day of the month.

Now we’ll really separate the firms with a new survey that reveals how quickly firms can get edited pre-bills back from attorneys and bills out to clients.

 Question #1:
From the time you give attorneys pre-bills hope long before they are due back in business days?

  • 33% 1 – 3 Business days
  • 33% 4 – 7 Business days
  • 20% 8 – 14 Business days
  • 14% 15 Business days or longer

Note: One firm reported that the “billing assistants” bill all month long and there is no requirements; the busiest billing day is the last day of the month.

 Question #2:
When in an average month when are you done billing and the bills are sent, emailed or e-billed in business days?

  • 13% 1 – 4 Business days
  • 40% 5 – 10 Business days
  • 13% 11 – 15 Business days
  • 34% 16 Business days or longer

Note: Many firms reported that their billing routinely stretches into the next month and they are sending bills at the same time they are doing pre-bills for the next month.

 Here are some quotes:
Worst: “We are very rarely completely done with the bills prior to the pre-bills out for the following month.”
Best: “We give the Attorneys 24hrs to respond back with changes or corrections. The morning following the 24hr review period the invoices are created, stuffed and mailed out within 4-5 hrs.

Conclusions: There is a wide disparity between law firms regarding how efficiently they manage the billing process. My review showed it had little to do with size of firm, number of branch offices or type of law they practiced. For example, the “Best” firm above has over 200 timekeepers and many offices. They however are highly disciplined,
automated and structured. The law firms cash flow is directly related to getting bills in the hands of clients in the shortest period of time. There are ways to improve the billing process. You might want to review my 10 part series
on improving the billing process starting here.

 

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

It Wasn’t About AFA’s

By on May 6, 2012

I recently hosted a, standing-room only client discussion at Aderant’s Momentum on AFA’s. The funny thing was that the discussion turned out to be not about AFA’s (Alternative Fee Arrangements) but about Project Management and Profitability Modeling. Sure, most of the firms in attendance were already providing their clients with AFA’s, one large UK firm even indicated that about 50% of their litigation was now fixed-fee work.

What firms wanted to hear about was how they could better manage projects and use matter planning tools to predict profitability. Many of the firms that contributed to the discussion were already rolling out matter planning tools, almost like “job costing” tools to their attorneys. One can note that some industries like construction have used job costing tools for years to bid on and then manage ever-more complex projects. Law firms can learn from these experiences while using similar tools.

Here are the key takeaways from this session:

  1. AFA’s are just a pricing model for services
  2. AFA’s require a commitment to project management, most importantly resource management
  3. Matter planning tools allow the firm to use past matters to help predict both the process and staffing levels for future projects.
  4. Managing attorney resources most often involves moving work down to the lowest practical levels within the team.
  5. Partners on the team who are doing associate level work will cause problems.
  6. Project Management will allow the team, and possibly the client to see actual dollars worked vs. budgeted. However, the key
    component normally difficult to determine is, estimate to complete.
  7. An AFA fixed fee should also mean “fixed scope” of work.
  8. Most participants indicated that in litigation, Most AFA fixed fee work was all done pre-trial. Once the case went to court, firms
    operated on a traditional hourly basis.
  9. AFA’s can be used as either loss-leaders, or marginally profitable, as a way of getting more profitable trial work.

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Categories: AFA - alternative fee arrangement, Best Practices, Financial Management, Law firm billing, Productivity

10 Best Practices for Split-Party Billing – Paper and e-Bills

By on February 12, 2012

Quite often insurance carriers require law firms to split a bill among two or more parties, this is normally referred to as Split-party Billing. Many times there are complexities that make a seemingly simple task, much more complex.

 We’ll examine “best practices” to both meet client requirements and provide the firm with solid accounting transactions for proper reporting and profitability analysis.

  1.  Split-party Billing usually calls for a master file to be set-up where all fees and costs are posted to that file. Additional “bill parties” are then added with a designation as to what % of the fees and costs will be billed to each of the parties.
  2. The system should check to be sure that 100% of the fees and costs are being allocated at all times.
  3. The use of effective dates for each party is very important, it’s not unusual that there are “in’s and out’s” of bill parties throughout the life of a case. The ‘bill parties” don’t necessarily have to be clients and matters in the system, they can just be an entity called “bill party”. Many times this is much easier to just designate a person or company that will pay a portion of a bill without setting up all the official client/matter information. You just need a name and address to send the bill to.
  4. Normally, in the case of Split-party Billing, a single rate is used to value each time entry. If different rates are used for each party it is difficult to determine a % of each bill to be split, from a dollar point of view. If each party must have a different rate, then the actual time entries are first split, and then valued separately for each party. If different rates are used each party receives a completely separate bill without calculations showing the % split.
  5. Since most Split-party bills are going to one or more insurance carriers it is convenient to get agreement ahead of time on a common phase and task code set to be used.
  6. At the time of billing the system looks to actually generate, in effect a single bill, with each bill party seeing their share of the total bill. So for example, if bill party #1 is paying 50% of the total and the bill is for $10,000 the bill would show all the detailed fees and costs, a “total bill amount” and then a line in the bill showing bill party #1 owes 50% or $5,000. If bill party #2 is paying 25%, they would get the same bill sent to their attention showing on one line that they owed $2,500.
  7. There are a lot of iterations of this general idea of a “single bill”, including different bill formats, including past billing and payment history and outstanding AR or Retainers being applied for each of the bill parties on only their copy of the bill.
  8. In Split-party Billing the “bill parties’ act as “sub-matters” to the master file or master matter. Therefore in many systems, Accounts Receivable can roll-up to the master matter, with the ability to drill-down to a bill party’s portion of the AR.   
  9. Split-party bills can also be separately e-billed to multiple “bill parties”, i.e. insurance carriers.  In the case of e-billing it is not unusual that the e-bill party want all the “pre-split” transactions, the e-bill party already knows what % they have agreed to pay and the LEDES format will handle all of this.
  10. The system should save all detailed transactions so that normal accounting adjustments can be made such as, reversing a bill, transferring a payment, charging interest for one or more of the bill parties, etc.

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Categories: Best Practices, Financial Management, Law firm billing

Survey – Wide Disparity in Billing Efficiency Causes Cash Flow Issues

By on January 22, 2012

In my last post I revealed the details on a study I conducted to see how successfully firms were able to get attorneys to get their time in from the prior month. The results were not bad, 74% reported they had attorney time posted no later than the 2nd business day of the month.

Now we’ll really separate the firms with a new survey that reveals how quickly firms can get edited pre-bills back from attorneys and bills out to clients.

Question #1:

From the time you give attorneys pre-bills hope long before they are due back in business days?

  •  33%    1 – 3 Business days
  • 33%    4 – 7 Business days
  • 20%    8 – 14 Business days
  • 14%    15 Business days or longer

Note: One firm reported that the “billing assistants” bill all month long and there is no requirements; the busiest billing day is the last day of the month.

Question #2:

When in an average month when are you done billing and the bills are sent, emailed or e-billed in business days?

  •  13%   1 – 4 Business days
  • 40%   5 – 10 Business days
  • 13%   11 – 15 Business days
  • 34%   16 Business days or longer

Note: Many firms reported that their billing routinely stretches into the next month and they are sending bills at the same time they are doing pre-bills for the next month.

Here are some quotes:

Worst: “We are very rarely completely done with the bills prior to sending the pre-bills out for the following month.”

Best: “We give the Attorneys 24hrs to respond back with changes or corrections. The morning following the 24hr review period the invoices are created, stuffed and mailed out within 4-5 hrs.

Conclusions

There is a wide disparity between law firms regarding how efficiently they manage the billing process. My review showed it had little to do with size of firm, number of branch offices or type of law they practiced. For example, the “Best” firm above has over 200 timekeepers and many offices. They however are highly disciplined, automated and structured. The law firms cash flow is directly related to getting bills in the hands of clients in the shortest period of time. There are ways to improve the billing process. You might want to review my 10 part series on improving the billing process starting here.

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

Survey – Getting Time Posted to Improve Law Firm Cash Flow

By on January 15, 2012

Law firms are like a cash registers, there is no revenue until you put the
actual cash in the drawer. The challenge is finding best practices that promote
maximize cash flow. This is short survey from responses to a law firm group
list serve determining how quickly law firms can close a month. The month-end
closing process is a key step for most firms in the cash flow process.

Here are the key steps to cash flow:

  1. Get all time and cost posted
  2. Balance the system
  3. Close the month
  4. Print and distribute the pre-bills
  5. Enter the pre-bill edits
  6. Print and send final bills
  7. Collect the cash

So how fast can law firms close the month by getting in attorney time
for the month, as measured in business days from the end of the prior month?

2nd Business Day ——– 44%

1st Business Day ——– 30%

3rd or longer Business Day ————- 26%

I think this as pretty good. Most firms responded that within 1
business day of “closing time entry” they have balanced their system, closed
the month and are starting the pre-bill process. The above survey does not measure
the time and costs that are not entered before the close-off.

In a future post we’ll take a look at how long it takes to get edited pre-bills
back from the attorneys and bills out the door. Leave a comment here for how
your firms closes off Time Entry at month-end.

 

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

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

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

Who’s Year is it – Yours or Theirs?

By on October 6, 2010

Clients typically request that firms provide them with a running total of how much money has been spent on each matter. Most clients are on tight budgets and it is convenient for them to know how much has been spent on a matter this year, including a comparison to budget when they review your bills. Pretty simple, right … yes, so long as the client is on the firm’s fiscal year or a calendar year.

Microsoft’s fiscal year starts in July, Apple starts in October …. you get the picture.

When firms include YTD billing and payment summaries on client bills they may want to show them as the clients fiscal year, not the calendar year. Much worse would be to show the information based on the firms fiscal year, which in many larger firms is not the calendar year.  The same goes budgets, can the firm provide a budget to the client based on the clients fiscal year …. might be helpful.

Check and see what is most convenient for the client and provide the analysis in a way that benefits them, not the firm.

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Categories: Best Practices, Financial Management, The Legal Market
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