Today, one of the most popular methods of cost savings in the area of legal spend management is e-billing. Some of the key drivers for selecting an e-billing system are invoice savings, efficiency, and the availability of metrics and reporting. In addition, the low cost of many e-billing systems (around 1% of legal spend reviewed) has made it a viable cost management tool for both small and large legal departments.
However, when reviewing invoices, it is not enough to depend solely on an e-billing system. Regardless of what might be touted by e-billing vendors, there are items that a software review alone cannot catch. Whether you have an internal staff dedicated to bill examination or you use an outsourced bill review vendor, it is important to have an attorney review in conjunction with the computer-based analysis. This 2-part article provides a general overview of issues with e-billing software, why an experienced bill review professional is needed, and then dives into the specific areas that cannot be identified by software analysis alone.
General issues with e-billing
Two common issues with e-billing reviews are the inaccurate flagging of items and the failure to identify items that are non-compliant with billing guidelines. Inaccurate flagging results when an otherwise payable fee or expense entry contains a “trigger” word and is flagged by the e-billing software. Alternatively, failure to identify items occurs when non-payable items do not contain trigger words and therefore are not identified by the software search.
Necessity for an experienced bill review professional
The above stated issues with e-billing lead to a greater necessity to have a separate internal department (versus depending on the in-house attorneys in the legal department) or an outside vendor for invoice review. Inaccurate flags lead to more time spent by the in-house attorney on the initial review or alternatively, more time spent on appeals by law firms. Inaccurate flagging can lead to a potential loss of money as busy in-house attorneys may not catch all of the billing issues that an experienced bill review professional is trained to identify. In-house attorneys may have more pressing duties and obligations concerning their cases and do not have the time to stop and shift gears to review invoices. Additionally, an outside auditor or in-house bill review department will take the time to interact with outside counsel to explain, discuss, and resolve billing issues- a benefit not offered with pure e-billing. And with more exact classifications and categorizations, organizations will receive more accurate and detailed billing data which allows for more meaningful analysis and reporting.
We have just reviewed some of the broad issues with e-billing (inaccurate flagging of items and the failure to identify non-compliant items) and why it is necessary for an experienced bill review professional to review the invoices once they are run through an e-billing system. In Part II of this article, available next month, we will take a look at some specific billing issues where software will not accurately catch items, or where timekeepers can outsmart computer searches by avoiding certain “trigger” words.
Today, one of the most popular methods of cost savings in the area of legal spend management is e-billing. However, when reviewing invoices, it is not enough to depend solely on an e-billing system. Regardless of what might be touted by e-billing vendors, there are items that a software review alone cannot catch.
Specific examples of billing issues that require human review
Now that we have reviewed the broad issues with e-billing (inaccurate flagging of items and the failure to identify non-compliant items), let’s take a look at some specific billing issues where software will not accurately catch items, or where timekeepers can outsmart computer searches by avoiding certain “trigger” words. This is not an exhaustive list, but it is designed to illustrate how common items can be inaccurately flagged or missed altogether.
Often there is not a clear line between a role assigned to a timekeeper and whether the work performed is appropriate for that role. For example, a computer would not be able to determine when a partner is performing associate-level work (i.e., performing research on a basic area of law, drafting a deposition notice, etc.). Only human review would be able to make this type of distinction.
Excessive Time to Perform a Task
Given the wide spectrum of tasks and activities performed by legal personnel, it is virtually impossible for a computer to accurately determine the required amount of time for an activity. For example, some subpoena notices are simple forms while others are complex and/or more technical, litigation correspondence (including e-mail) may be a few words or many pages, and preparation of litigation binders may be substantive or clerical. Analysis by an experienced attorney identifies excessive time in particular entries as well as patterns of overcharges for repetitive tasks.
Duplicative Entries/Spread Billing
When a law firm handles more than one matter for an organization, duplicative entries and/or excessive fees can be disguised by spreading them across matters. The entries themselves are not questionable, but when they are spread across matters, the pattern (or the full extent of the pattern) will not be apparent to a computer.
A computer cannot decipher patterns of excessive billing. For example, repeated entries of 2.0 hours to attend a weekly conference call may or may not raise concern for this particular task. A computer cannot determine how much time is appropriate for different activities.
Many entries for attendance at events include “hidden” travel time. The time spent in transit is added to the attendance time and the word “travel” is not used in order to avoid detection by the computer. These entries pose a significant issue when billing guidelines limit compensation for travel. Additionally, computers cannot distinguish between local and long distance travel or identify what amounts to excessive travel time (i.e., billing 7 hours to travel 130 miles).
Billing Guidelines Issues
The term “research”
- Software can identify the term “research” but cannot evaluate the complexity or necessity of the subject matter.
- “Research” is used for more than legal research, such as “research for potential experts” which can lead to inappropriate flags.
- The term is both a verb (research venue issues) and a noun (review plaintiff’s Motion to Dismiss and the research cited therein). The computer cannot make the distinction between the noun and verb and may result in a false positive.
Interoffice Conferences/Multiple Attendance
- For a computer to accurately capture non-compliant entries, it would have to be programmed with names, nicknames, initials, etc. for each timekeeper, then confirm that 2 or more billed for the same meeting (as opposed to different meetings on the same day).
- Travel time or other issues related to multiple attendances are even more difficult for a computer to accurately identify.
- Limited vocabulary in computer searches miss non-compliant entries, while expanded vocabulary results in false flags. For example, a word search to identify the clerical task of copying documents would flag the following entry: “analyze revised copy of settlement agreement.”
- Software is not able to catch patterns of routine administration when there is no trigger word used. For example, a daily entry by a paralegal to “review correspondence” would not be caught.
E-billing can be an extremely useful tool in an organization. The software can increase efficiency through the electronic delivery of invoices, ability to track UTBMS codes, and automation of payments to law firms, just to name a few of the benefits. However, it is important to remember that e-billing is just one piece in a legal cost management program. Software searches can mistakenly flag items or altogether miss non-compliant items. If a company is serious about cost savings and data accuracy for reporting purposes, it is vital to include a layer of human review to the bill review process. But, assigning the bill review process to an in-house attorney places a large burden on their time, not to mention a potential loss of money as busy attorneys may not catch all of the billing issues that a professional dedicated to bill review may find. Ideally, an organization should have a group (or single attorney depending on the size of the company) devoted to review invoices or hire an outside bill review company. Relying on a team focused on bill review allows for a more consistent review methodology across the organization, permits in-house attorneys to focus on items at hand, and keeps law firms happy as they are consistently paid for legitimate fees and expenses.