Billing Hygiene and Why It Matters to the Client Relationship
Why does billing hygiene matter more now than it used to? Clients have always cared about their bills. However I believe that a change took place in the belt-tightening wake of the economic crash. Among its consequences, clients developed a sharper-than-ever need to achieve value for money in every area of spend. As a result, legal bills are being scrutinized as never before.
Alongside this new era of scrutiny is evolving technology. If the crash gave clients an incentive to scrutinize their legal bills more thoroughly, technology has given them the means. It no longer takes skilled (and therefore costly) manpower to parse every line item of a firm’s bill. As invoices are delivered in standard electronic form across the industry, analysis and comparison of legal bills has become a routine exercise for general counsel. And under such electronic scrutiny, transparency rules reveal who is doing what and for how long on any given matter.
Finally, the fundamental relationship between law firms and their clients has shifted in the last decade or so. Partly due to cost pressures and partly because of technology, many legal services have become commoditized. As a consequence, where firms were once trusted business partners, today they are more likely to be seen as mere legal services suppliers. One ramification is that there’s now much less loyalty when it comes to selecting outside counsel, especially for high volume commodity work. This makes it more important that firms build meaningful relationships with their clients. Billing hygiene matters in this regard because the trustworthiness of bills is at the core of the relationship.
So what exactly is billing hygiene? For me, it’s simply the production of clear, accurate bills which are delivered in a timely manner in compliance with the client’s demands. The fundamental purpose of billing hygiene is threefold. First, bills must show the client that they are getting exactly what they pay for, thus demonstrating the firm’s credibility as a trustworthy supplier of services. Second, bills have to demonstrate value for money, thus giving the client confidence via every bill in their choice of firm. And third, they need to code and format the bills to the client’s demands to facilitate the general counsel’s review of legal spend. Wherever firms can increase their billing hygiene, they will benefit from stronger client relationships by upping their trust score with clients. So the rest of this article looks at how firms can improve billing hygiene.
Accurate and True
The first thing to focus on is producing bills that are true in every detail. Strange as it may seem, clients are occasionally billed for work that didn’t take place, or didn’t take place as billed. This can happen when lawyers are reconstructing time after the fact in trying to catch up with delinquent time. An obvious example is when a client is charged for a conversation that took place on a day when the client knows he or she was on vacation. So what could have been a genuine error can end up being very costly in terms of the firm’s trust score.
Second, the narrative descriptor of time activity should be accurate and clear. The client shouldn’t have to question what the narrative is referring to or what it means. They shouldn’t be made to wonder if some wool is being pulled over their eyes. Narratives need to be logically constructed, informative, concise, and easily understood, with an emphasis on value.
Third, the activity must be properly classified using the correct codes (known as UTBMS in North America and J-Codes in England and Wales). These codes are now tagged against each time entry so that clients can see task, activity, and expense codes telling them what they’re being billed for and that their billing guidelines are being enforced. So firms need to consistently be accurate with coding in the knowledge that the client’s electronic systems can classify, sift, filter, and compare legal bills – automating and upping the level of scrutiny and exposing inconsistencies and over-charging very readily.
Finally, the bill must be delivered in a timely and consistent fashion. Otherwise people have mentally (and in some cases even physically) moved on. Delays result in uncertainties over what’s being billed, queries, and—not least for the firm—deferred payment. Firms should therefore ensure they have the capacity to get the bill in front of the client while the client can still recall the activity that’s being billed, fully recognizing that value fades over time.
People and Systems
Firms can improve billing hygiene further by paying attention to people and systems. They need to give some thought to their processes, procedures, policies, and culture around time capture and billing.
For instance, ask yourself if the firm is taking time entry seriously? Is timekeeping performance being measured? The culture in this regard generally comes from the top. So are the senior partners modeling best-practice time capture behaviors, or is it a question of do what I say, not what I do? And does the firm have policies and procedures that drive positive behaviors in relation to time capture? This might include a range of incentives and or penalties that enforce good timekeeping performance – for instance rewards for prompt time entry. To reinforce policies being adhered to and procedures followed, firms may also need to supply some appropriate training. Training could also support lawyers with, for instance, writing clear consistent narratives on their bills.
At the same time, firms also require systems that contribute to billing hygiene. Contemporaneous time recording systems are hugely helpful in this regard because the sooner attorney laywer records a time entry, the more accurate it is likely to be. Likewise, systems that provide a mobile, anytime, anywhere time entry capability invariably raise the standard of billing hygiene.
Firms can also take steps to ensure the right UTBMS or J-code sets are properly assigned to matters and referenced via their timekeeping system – either their own sets, or the specific limited code sets supplied by the client. After all, a firm with 1,000 lawyers entering eight billable hours a day could conceivably have upwards of 8,000 entries to code properly every day. To put the end-user in the vicinity of being correct, ensure your system is configured to offer filtered lists that provide relevant code assignments and reduce the choice in the number of codes. These should appear in the path of each time entry to help reduce the chance of slip-ups.
Last but not least, do what your clients are doing and actually audit your own billing hygiene. You can check the consistency and clarity of narratives and the velocity of time entry—that is the time lag between activity and time entry—and look to reduce it. Firms are even using artificial intelligence (AI) to objectify the time narratives in an effort to match and cross reference the results against task and activity codes.
In performing this audit, you’ll also reap the bonus of finding out what your clients might already know – if your firm does in fact provide good value. This measure is derived from examining whether you consistently allocate the right price level of resource to the various stages of a file. It also gives you the data you need to make changes, if necessary, because if you allocate resources more accurately going forward, you can become more competitively priced as a result.
Trust and Value
Billing hygiene is important because today’s firms need to project trustworthiness and value. With that comes credibility and stronger client relationships. At the same time, you stand to be paid what you’re owed sooner and without question.
The delivery of strong billing hygiene relies on the right policies, culture, and processes operating in tandem with the right systems. These should ensure that the fundamentals of time entry and bill production and review are optimized within the firm.
Firms need to review their own billing hygiene, because the knowledge they can derive from interrogating this data gives them further insight into the value they are delivering to clients. It also tells them how that value can be enhanced.
All told, then, billing hygiene has become an important component of competitiveness for today’s firms and not one that should be ignored.