A good legal bill review program begins with a strong set of billing guidelines. Law firms, especially large firms, have timekeepers who bill to multiple clients, each with their own unique set of billing requirements. Due to the multitude of guidelines that the firm needs to follow, it is important to present your guidelines to a firm at the onset of the relationship so the firm will have an excellent understanding of your expectations. Many attorneys will invoice the same way for each client, assuming that most billing guidelines are similar. It is vital to review your invoices to make certain that the firms are adhering to your billing guidelines. When you are willing to review your legal invoice against your guidelines and question entries that are not allowed according to the guidelines, you will most likely see more accuracy in billing procedures by firms in the long run. This blog post will outline some tips for improving your billing guidelines in 7 areas: tasks per entry, billing frequency, task descriptions, overhead, research, staffing, and travel.
Tasks per Entry
The practice of grouping more than one task together and assigning a single time increment is referred to as block billing. Block billing is a common issue found in legal invoices. Block billing makes it difficult to identify and quantify the reasonableness of work performed and the cost of the work. The majority of billing guidelines require that time is billed in increments of one-tenth of an hour (.1) or 6 minute increments. Billing multiple tasks in one entry makes it impossible to know how much time was allocated to each task. The following is an example of a block-billed entry and how this type of entry can be costly for the client over time:
Example: phone call with client; e-mail to Mr. Smith; drafted letter to Mr. Davis 1hr.
Let’s look at each of these tasks individually:
- Phone call with client: 6 minutes
- E-mail to Mr. Smith: 12 minutes
- Drafted letter to Mr. Davis: 30 minutes
- Technically, this example adds up to .8 hr. versus 1 hr. In this case, the activities would have cost the client less if they were billed individually.
Often, our clients will add illustrations directly into their billing guidelines in order to clarify their billing requirements. Adding an example such as, “entries such as ‘prepare for and attend event’ and ‘travel to, attend, and return from event’ are considered blocked entries and are not compliant with the billing guidelines” can be helpful illustrations for the law firms. Also, a law firm should not be compensated for the time it takes to correct the blocked entries.
Frequency of Billing
It is important to note the billing frequency for law firms in your billing guidelines. Many clients require their firms to bill on a monthly or quarterly basis. This can assist with reducing administration costs and cash flow issues in the company.
Billing entries should describe the activity performed with specificity. Descriptions such as “prepare for trial” and “work on case” and “office conference” are considered vague. Ideally, an entry describing communication activities (emails, correspondence, conferences, meetings, etc.) should identify the receiving parties and subject matter of the communication. It is important that the client has the ability to confirm that the task relates to the case, is not an administrative or overhead function, does not duplicate the work of other timekeepers, and is not excessive for the time associated with the entry.
The hourly rates submitted by a law firm include overhead expenses. Billing entries should not include charges such as office supplies, library staff, proofreading documents, preparation of bills and invoices, or filing or e-filing documents with the Court. Even if an associate or paralegal bills an activity that can be performed by a secretary, file clerk, or other nonprofessional staff member, the task should be considered part of the firm’s hourly rate and the charge should be denied.
Many clients have a limit of 4 hours on research entries. Any billing entry above 4 hours will not be reimbursed unless there is prior approval of the client. Entries describing legal research should indicate the subject matter of the research and its purpose. For example, “research statute of limitations for motion to dismiss.” Additionally, if a topic is presumably familiar to an experienced counsel (items such as rules of procedure and evidence, or elements of common causes of action, etc.) research on such a topic should be questioned.
The majority of clients are concerned about keeping staffing levels to a minimum. Some billing guidelines even go so far as to limit each matter to 1 partner, 1 associate, and 1 paralegal unless there is prior approval by the client. Overstaffing could appear in an invoice as duplication of effort (same person performs same task, different person performs same task as another biller). An invoice may also show excessive intra-office conferencing. Those billers with material responsibility for the case should bill for attendance at an intra-office conference and they should be limited to necessary strategy sessions related to events in litigation.
Other staffing issues include:
Multiple attendance at meetings, depositions, and court date – Attendance at events should be limited to those timekeepers who are making a significant contribution to the proceeding.
Orientation for billers – This includes situations where a new attorney starts on a case or when giving education or administrative direction to the staff.
Billing at associate rates for paralegal activities – Activities such as “preparation of routine notices” whether the task is performed by an associate or a paralegal, is a paralegal activity which should be billed at a paralegal rate, regardless of the timekeeper’s position. Similarly, tasks that could be performed by an associate should not be compensated at a partner rate.
Travel time is another area that is often questioned. Companies handle reimbursement for travel time in various ways. Regardless of how a company reimburses travel, it should be addressed in the guidelines in order to set expectations for the law firm. Often, a company agrees to pay full hourly rates for travel as long as the attorney is working on company matters. If the attorney is not working on company matters, they will pay 50% of agreed hourly rates. Other companies work with thresholds. For example, anything under a certain amount of hours or miles is billed at a full rate and anything over is billed at ½ rate.
These areas are just a few of the ways to improve your billing guidelines. The most important thing to remember is to continue to enforce your guidelines with law firms. This will work to create adherence within your law firms. Finally, don’t be afraid to revise your guidelines. If you are using a third-party bill review provider or if you are reviewing invoices in-house, make sure to track the categories of billing violations. This will assist you in identifying where your guidelines are strong and where there is room for improvement.
For more information about how to improve your billing guidelines in order to more effectively manage your legal spend, contact Stuart Maue at: 1-800-291-9940 or e-mail: firstname.lastname@example.org