In order to maintain good outcomes while controlling costs, corporate legal and claims departments need to understand the drivers of value. That’s why so many have implemented analytics tools that help guide their decision making with data. And with clients passing cost pressures on to their outside counsel, many law firms are now starting to see the wisdom in using all of those analytics.
There are several ways in which analytics can help inform good decisions for law firms just as they do for clients. In this post I will highlight two mission-critical areas of focus for law firms that are less challenging with the right metrics in place: budget predictability and billing practices.
Improving Budget Predictability
All clients want to know that when a budget is set on a matter, it will not be exceeded. The best way that a law firm can ensure this is to leverage a client’s matter and spend data to evaluate budget management and proactively track budgets against actual spend. There are several things law firms can do, aided by analytic tools, to improve predictability:
- Stay aware of how much budget remains on matters. By regularly checking the remaining budget percentage on a client’s matters, you decrease the chances of exceeding budgets and having invoices rejected. Be sure to include past invoices, those already approved and still in review, for a more complete view of how much is left on a matter budget.
- Don’t forget to check phase budgets. In cases where clients budget down to specific phases of a matter, be sure to keep each phase in mind. Even when there is plenty of budget still available on a matter, invoices will be rejected if spend is too high in a specific phase.
- Compare original matter budgets to the most recent revised budgets. Looking at the degree to which budgets tend to need revision helps to identify the reasons why budgets typically rise. This gives you the data you need to set more accurate budgets on future matters.
- Keep an eye on how long budgets have been in review. If there appears to be a delay in the client’s approval of a budget, it is wise to contact them and find out whether they need more information. This is helpful in expediting the approval process and promoting the matter to the e-billing stage.
Refining Billing Practices
Checking individual invoices for status updates is time-consuming and doesn’t provide the higher-level view that helps you manage your overall approach to billing. It is helpful to have analytics available to give you visibility into invoicing status across multiple invoices and matters so that you can improve the firm’s billing guideline compliance.
- Evaluate client adjustments to invoices. Looking at adjustments taken on an entire segment of invoices can help you recognize patterns that lead to billing violations and improve your processes to reduce these instances. Invoices that need no adjustment mean less work for the client and more predictable revenue for the firm.
- Look for invoice rejection patterns. Invoice rejections are even more disruptive to the firm’s billing than adjustments are. Examining groups of rejected invoices segmented by practice area, timekeeper, or other factors may spark strategies for improved billing practices.
- Find out if your billing is regularly delayed. Some delays cannot be avoided, but if you have a pattern of delayed invoicing with a client, it could indicate an opportunity for increased invoicing discipline. Clients like timely bills because they are often more detailed and accurate, but they also help keep the firm’s cash flow consistent.
- Check for invoices still to be paid. It is always wise to stay aware of invoices that clients are still reviewing and those that have been approved but are awaiting payment. Knowing how far along an invoice is in the client’s process gives you a sense of when the firm is likely to be paid.
Just as their clients use analytics to control costs, law firms have an opportunity to implement metrics that help to drive the value they deliver. By studying carefully-gathered data, firms can improve both the predictability of their budgets and the effectiveness of their invoicing. Improvements like these make clients happier and make law firms more competitive.