This is the first in a series of three blog entries I’ll post about the most common billing activities corporate legal departments experience that result in unnecessary costs, demonstrate poor invoicing practices, or impede data collection. Identifying these issues is important because, with accurate information and good legal management discipline, it is possible for a legal department to significantly cut back on spend and improve outcomes.
A strong, effective corporate legal management strategy is built on good relationships with outside counsel. Collaboration, communication, and strategic alignment are key. Just as important, but often overlooked, is the billing relationship. If billing tasks are executed poorly, excess cost can hurt corporate profitability as well as funding for in-house staffing.
From my experience helping clients use their invoice data to improve their bottom line, I have identified ten frequent billing issues that often result in unnecessary costs:
Six Minute Billing: Billing a large number of six minute (0.1 hr.) entries. When six minute line items are prevalent in a law firm biller’s history, it is often an indication that the biller is invoicing one-tenth of an hour for every small task, even those tasks that take far less than six minutes. Common examples include reviewing short email messages or accepting meeting requests.
Upbilling: Rounding up time entries to the hour or half hour. If a timekeeper records time properly in six-minute (or 1/10th of an hour) increments, then, statistically, time entries should show roughly equal numbers of time units to the right of the decimal place, e.g. 2.3 hours, 1.6 hours or 3.5 hours. But if a timekeeper has a tendency to round up to the nearest half hour or hour, then the time entries will show a disproportionate number of entries for half hour (x.5) or full hour (x.0) units of time.
Block Billing: Including more than one task in invoice line item entries. Each line item in an invoice should reflect one task, describing the generation of one item of work product. When multiple tasks are included in a single entry, it makes it difficult for a reviewer to evaluate the reasonableness of time charged and the appropriateness of the UTBMS Task Code assigned to the invoice line item.
Heavy Billing: Billing many hours in a single day, for example 9, 10, 12 or 16 hours. Legal rates are high, and as a result, peak efficacy is reasonably expected. Individuals who routinely bill high numbers of hours generally cannot provide the expected value. It is physically impossible. As a result, the time billed and work product generated by these timekeepers must be carefully examined. As a result of examining such entries, you may require that the firm implement a more appropriate staffing plan.
Duplicate Billing: Using the exact same wording on multiple time entries. Often, some billers use the exact same language in multiple invoice line item entries. Common examples include, “Document Review”, or “Trial Preparation”. Individuals must include enough detail to differentiate among similar tasks. If timekeepers are not specific, then there is inadequate information upon which to determine the reasonableness of time billed.
Low Value Billing: Small amounts of time billed by timekeepers who are unfamiliar with the matter. While there may be occasional exceptions, generally time billed by a timekeeper who is not familiar with a matter brings lower value than an individual who is familiar with the matter. When individuals drop into different matters for short time periods, that practice can be a sign that the firm needs to staff more carefully in order to provide the best value and results.
Late Billing: Submitting invoice line item entries several weeks after the work was performed. Generally, law firms are required to bill hourly time on a monthly or bi-monthly basis. When invoices that should contain billing only for recent work also contain some entries for work performed months earlier, it suggests that the time billed was reconstructed, which rarely works to the benefit of the client.
Unusual Entries: Entering invoice line items that include extraordinarily high or low rates. While unusual entries are called for on occasion, these types of line items need to be examined as they generally reflect either improperly coded alternative fee arrangements (extraordinarily high rates) or reflect billings for overhead expenses being passed along to the client as fees (unusually low rates).
“Other” Billing: Coding time to non-specific UTBMS task codes. UTBMS codes are the key to the kind of specific, granular reporting that supports smart, strategic legal department management. It is important to ensure that any work done by outside counsel can reasonably be categorized with as specific a code as possible.
Weekend Billing: Billing a large number of hours on Saturdays or Sundays. Billing on weekends is often appropriate. However, some individuals routinely bill heavy weekend hours, which should be examined. Lawyers usually attend to their most critical tasks during the regular work week. A large number of hours worked on weekends may indicate that your legal department’s work is being given a low priority.
In summary, I have seen the above practices exhibited by law firm personnel for every client with whom I have ever worked. The estimated unnecessary costs to those clients is usually in the hundreds of thousands of dollars. In every instance, the client is surprised and somewhat chagrinned by what we see. However, such practices can be easily identified and addressed. Usually, the law firm relationship partners are unaware that such practices are ongoing. When advised, they will generally support the client and curtail such activities.
To address these situations, the actual invoice entries exhibiting those practices should be copied and presented to outside counsel. Examining actual billed entries that reflect inappropriate billing practices is entirely principled and appropriate. Analyses of billing data using business intelligence is common, acceptable, and necessary legal management due diligence. Sharing this information enlightens your law firms to your level of management sophistication and to the discipline they need to impose in order to maintain good relations. More on that sharing process in my next post.
For more information on how Actionable Insight reports for Passport and TyMetrix 360° can help you quickly and easily identify costly billing practices, visit our website.