Attorney time entry is one thing, but are those time entries accurate and in compliance with client billing guidelines.
Prior to founding Bellefield, my Co-Founder Dani and I founded and built one of the most successful eBilling companies to date. As you can imagine, our background in e-billing causes us to feel very strongly about billing processes within the legal industry. Our experience tells us this: the system is broke.
The current situation is this: time entry is entirely disconnected from client billing rules. This leads to several challenges for today’s law firms, spanning from revenue to compliance. In this post, we’ll explore real-time compliance and how it benefits law firms.
Let’s start with the time entry challenges held by today’s law firms:
#1: Attorneys don’t enter their own time.
Attorneys rarely enter their own time. This leads to inaccuracies and gaps in time recording.
#2: There is significant time leakage.
When contemporaneous time entry is not practiced, the result is time leakage: time goes unrecorded and not billed.
#3: Time Entry doesn’t comply with client billing guidelines.
Even if an attorney is keeping time contemporaneously, billable time entered that is not in compliance with client billing guidelines is often unrecognized until much later in the billing process, leading to delays in processing and payment.
#4: Reconstructive Time Entry is still commonplace.
When time entry logs are due, attorneys spend hours analyzing calendars and call logs to “guess” how they spent their time in order to bill clients for work completed. This reconstruction often times leads to invoice rejection due to the disconnect with client billing guidelines. This practice happens far more often than most think.
#5: Invoices are rejected or written off.
Payment is not received or collected due to invoices sent to the client that do not adhere to client billing guidelines.
#6: Electronic billing is ridiculously complex.
Electronic billing is rife with complexities, leading to several inefficiencies at the firm.
The Complexities of Electronic Billing
Many law firms assume that e-billing will help solve compliance issues and cut down on rebilling time. However, approximately 24% of law firms use e-billing for their invoices, and it accounts for about 29% of their revenue.
The use of e-billing continues to rise, increasing 30% between 2011 and 2013 (with a growing trend towards smaller firms). There are now 37 commercial e-billing vendors to choose from, with over 65 custom-made systems to fit any size law firm. With options like those, it seems, at least on the surface, that it is the solution to any and all timekeeping problems. However, if you look closer, it actually poses some of the biggest challenges.
First of all, there is still the matter of how much time each firm actually spends on these issues. In fact, e-billing is actually more complicated than issuing a traditional paper bill. A paper bill takes an average of three steps to create and send, whereas an e-bill takes an average of eight.
Additionally, e-bills can cause serious cash flow issues. It takes an average of 14 days longer for a client to pay an e-bill than it does for them to pay a paper bill. Did you know that 44% of e-bills received are reduced or rejected the first time, while 25% of collection cycles are delayed, and 3% of e-bills are written off entirely? And for all of that, the problem of client billing compliance still isn’t resolved, as 91% of those rejections are due to invoice content and format issues. Don’t worry, this isn’t all bad news. The good news is that you can do something about it!
Solving Compliance Issues
Clients want an accurate, point by point account of what they’re being billed for. As such, a lot of “general” words commonly used in legal invoices will trigger an automatic rejection until they can be clarified. Some of those words to avoid include:
- Work on File
- Work on Discovery
- & (implies you’re listing multiple things under a single item, obscuring their individual costs)
- Trial Preparation
Even with smarter, more specific billing practices, though, some of your invoices still won’t be compliant with client guidelines - which is one of the big issues here. So, your best practice is to catch the errors as early as possible, and rectify the situation before invoices are submitted to clients. That’s why real-time compliance is so important.
When Bad News Early is Good News: Benefits of Real-Time Compliance
Real-time compliance goes beyond regular electronic billing to link the needs of the accounting department with attorney time entries to ensure better, more accurate billing. With real-time compliance, the attorney submits the invoice to accounting electronically, as soon as each billable session is over, eliminating the need for reconstructive time entry, and the myriad of extra time that it takes for reconstruction. At that point, the time entry is automatically validated against client guidelines. If it is not compliant, the attorney is presented with a push notification alerting the attorney of the error and providing the opportunity to fix it. This prevents the scenario where a client is sent an invoice that is not in compliance with their billing guidelines, therefore expediting the approval process.
For the firm, this means:
- faster billing cycles
- faster payment
- fewer rejections/write-offs
- increased efficiency, as less staff resources are devoted to managing rejections
- increase in firm revenue
As you can see, attorneys are key to this process. By making attorneys part of the process, it improves the firm’s operational efficiencies, and overall leads to more time for attorneys and more revenue for the firm.
At Bellefield, we feel very strongly about real-time compliance and its potential benefits to law firms of all sizes. With our extensive experience in e-billing, we understand how difficult compliance can be for attorneys, and how much time and money can be wasted on rejected invoices and rebilling. Because of this, we feel it’s essential for law firms to combat these problems with a real-time solution that can reduce those rejections, ultimately saving time and increasing revenue.
Have you implemented real-time compliance at your firm? Share your comments below.