Every business wants to develop good, strong relationships with their vendor partners—but what if those partners are engaging in common billing violations that could hurt your organization?
Unfortunately, corporate legal departments (CLDs) are all too familiar with this challenge. As billing guidelines become more complex, CLDs are discovering more guideline violations from their outside counsels, some of which can be hard to spot with manual invoice review processes. Often these violations are inadvertent, and the law firm may not even realize that they’re not complying with their client’s legal guidelines. Meanwhile, the CLD is being subjected to spend leakage that can result in the loss of millions of dollars per year.
That’s a problem, especially when general counsels around the world are no longer being given blank checks for their CLDs as cost centers. Corporate legal teams need mechanisms to help them easily identify where the leakage is coming from, and when a billing violation has taken place.
It helps to be able to identify the most common violations and their potential impact on the organization. According to data derived from our own LegalVIEW® BillAnalyzer, here are the five violations that can have a direct impact on CLDs’ bottom lines:
Block billing: Block billing homogenizes multiple tasks into a single billing entry. Block billing makes it difficult to correlate work to a specific task—a useful guideline that CLDs can use to estimate the length of time and money that should be allocated for similar projects in the future.
Violation of core billing guidelines: Certain line items may not follow a CLD’s core billing guidelines. Examples can include duplicate or excessive line item charges, up billing (rounding up time entries to the hour or half-hour, rather than in increments of 1/10 of an hour, which can lead to overbilling), or anything else that may be considered in conflict with the CLDs’ billing policies.
Vague task descriptions: Lawyers tend to like a lot of detail in everything, including the invoices they receive. Invoices with vague descriptions lack specificity about the purpose of the tasks completed. Phrases such as “case management, attention to file, or prepared for staff meeting” billed for 12 hours obscure the details of the work done and can make it difficult to reconcile timekeeping hours or determine compliance with billing guidelines. Ambiguous billing descriptions cannot fully illustrate the connection between the work your outside counsel is doing and the value that they’re adding (or not adding). All of which hurts your ability to display accountability to your organization’s C-suite.
Matter management: Matter management violations occur when a firm disregards a CLD’s alternative fee arrangements or flat fees for a specific matter, or when they bill to the wrong matter. Sometimes these violations are completely unintentional. Intentional or not, they must be flagged to ensure billing is attributed to the appropriate matter and adheres to whatever fee arrangement is in place.
Late invoices: CLDs are being asked to become highly diligent when it comes to controlling spend and managing to budgets. Prompt payment of invoices helps keep things on track from a financial perspective. Unfortunately, many firms do not issue invoices on time, often waiting 31 days or more to send out bills. Just like in one’s personal life, a late bill is often considered a surprise bill, and a delayed legal invoice can create challenges for CLDs that are trying to effectively track, budget and plan their expenses.
Bill review processes that use technology to automate and analyze invoice data can flag potential violations and improve compliance with greater speed and accuracy. CLDs can be alerted to potential discrepancies quickly to avoid to revenue leakage and maximize their ability to become profit centers for their companies.
If you’d like to learn more, be sure to check out our white paper: AI in Corporate Legal: Meeting Challenges and Predicting the Future. If you’d like to learn more about the trends amongst general counsels, download our GC Barometer 2019 report.