January 13, 2020
By Jeffrey SolomonReading Time: 3 minutes
As an important aspect of vendor management, outside counsel billing guidelines are a foundational element of the CLOC Core Competencies. Billing guidelines are one of the key components of good, strong relationships with vendor partners—but sometimes those partners miss the mark by engaging in common billing violations that could hurt your organisation.
Unfortunately, corporate legal departments (CLDs) are all too familiar with this challenge. As billing guidelines become more complex, CLDs are discovering more guideline violations from their outside counsel, some of which can be hard to spot with manual invoice review processes. Often these violations are inadvertent, and the law firm may not even realise that they’re out of compliance with your guidelines. Meanwhile, the CLD is subjected to spend leakage that can result in the loss of millions of dollars per year.
That’s a problem, especially when general counsel around the world are increasingly expected to run their CLDs like a business unit. Corporate legal teams need mechanisms to help them easily identify where the leakage is coming from, and when a billing violation has taken place.
Look for These Typical Violations
It helps to be able to identify the most common violations and their potential impact on the organisation. According to data derived from Wolters Kluwer’s ELM Solutions’ LegalVIEW® BillAnalyzer data, here are five violations that can have a direct impact on CLDs’ bottom lines:
Block billing: Block billing homogenises multiple tasks into a single billing entry. Block billing makes it difficult to correlate work to specific matters. That, in turn, makes it tough to discern how long it took to complete a particular task—a useful guideline that CLDs can use to estimate the length of time and money that should be allocated for similar projects in the future.
Vague task descriptions: Lawyers tend to like a lot of detail in everything, including the invoices they receive. Invoices with vague descriptions lack specificity about the purpose of the tasks completed. Phrases such as “case management,” “attention to file,” or “prepared for staff meeting” billed for 12 hours obscure the details of the work done and can make it difficult to reconcile timekeeping hours or determine compliance with billing guidelines. Ambiguous billing descriptions cannot fully illustrate the connection between the work your outside counsel is doing and the value that they’re adding (or not adding). All of which hurts your ability to display accountability to your organisation’s C-suite.
Violation of core billing guidelines: Certain line items may not follow a CLD’s core billing guidelines. Examples can include duplicate or excessive line item charges, up billing (rounding up time entries to the hour or half-hour, rather than in increments of 1/10 of an hour, which can lead to overbilling), or anything else that may be considered in conflict with the CLDs’ billing policies.
Matter management: Matter management violations occur when a firm disregards a CLD’s alternative fee arrangements or flat fees for a specific matter, or when they bill to the wrong matter. Often, these violations are completely unintentional, but they must be flagged to ensure billing is attributed to the appropriate matter and adheres to whatever fee arrangement is in place.
Late invoices: CLDs are being asked to become highly assiduous when it comes to controlling spend and budgets. Prompt payment of invoices helps keep things on track from a financial perspective. Unfortunately, many firms do not issue invoices on time, often waiting 31 days or more to send out bills. Just as in one’s personal life, a late bill is often considered a surprise bill, and a delayed legal invoice can create challenges for CLDs that are trying to effectively track, budget and plan their expenses.
Bill review processes that use technology to automate and analyse invoice data can flag potential violations and improve compliance with greater speed and accuracy. CLDs can be alerted to potential discrepancies quickly to avoid revenue leakage and maximise their ability to become profit centers for their companies.
If you’d like to learn more about current priorities and trends among general counsel and legal departments, see this summary of the GC Barometer 2019 findings.
About Wolters Kluwer
Wolters Kluwer’s ELM Solutions is the market-leading global provider of enterprise legal spend and matter management, contract lifecycle management and legal analytics solutions. We provide a comprehensive suite of tools that address the growing needs of corporate legal operations departments to increase operational efficiency and reduce costs. Corporate legal and insurance claims departments trust our innovative technology and end-to-end customer experience to drive world-class business outcomes. The award-winning products include Passport®, the highest rated ELM solution in the latest Hyperion MarketView™ Legal Market Intelligence Report; TyMetrix® 360°, the industry’s leading SaaS-based e-billing and matter management solution; CLM Matrix, named a “strong performer” in the 2019 Q1 CLM Forrester Wave report; and the LegalVIEW® portfolio of legal analytics solutions based upon the industry’s largest and most comprehensive legal spend database, with more than $130 billion in invoices.