A good legal spend management 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.
• Task Descriptions
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.
See our next blog post for the last 4 tips for improving billing guidelines.