Is Your Billing Process Costing You?

As a Legal Practice Advisor, I am often involved in the phase of transformation projects where the law firms want to increase their billing output. Importantly, this is not always about lawyers wanting to charge their clients more. It is more often about recovering for work already delivered.

The trigger for these requests is an increase in firm lock up. The symptom is often experienced by the firm partnership as a decline in revenue.

Lockup is the combined total of work in progress (usually recorded as time entries ready to be billed) and invoices billed and not yet paid.

A common contributor to high lock up is the failure to bill clients in a timely way. I'm not expressing much new here and there are plenty of those who support the profession in getting timely invoices under control from a cashflow perspective.

Poor Process Leading to Pressure

But what if your law firm strictly sticks to timely billing and you are still feeling the revenue pressures?

In fact, there are now more pressures because staff are complaining about how the time it takes to process invoices is cutting into doing more meaningful legal work. There might be a reason for this.

As law firms grow and evolve as organisations, so do the processes.

This is a phenomenon that happens across all business types. The pinch felt at billing can be a sign of naturally evolved processes which may no longer suit the firm business. This often becomes transparent after major transformational change and productivity gains are felt across the legal work aspect of the firm, adding pressure to areas that are now ripe for their own version of transformation.

It is a fact often missed - or ignored - that when changing legal practice management systems, all firm processes should be reviewed. The review should involve a change, as there are always productivity gains to be made. What happens in reality is that law firm change managers or committees select areas which are comfortable for change. Billing tends to get overlooked because it seems to have a particular process that can be challenging to transform.

Billing is challenging to transform because law firm billing processes usually involve multiple business units across a medium-sized law firm. Whilst it is still a challenge, it is relatively easy to instigate a transformation within a firm business unit. It is a whole other level starting a transformation cross-functionally.

There are five common billing processes which can lead to productivity loss leading to multiple stakeholders feeling pressures:

1. Invoices are either generated by a central clerk or the specific division's administrative support team. As the person creating the invoice does not necessarily have active carriage of the matter, they rely on the time entries in the system that are sitting there at the time of billing. This bakes into the process the assumption that time recording has been diligently completed for this phase of work. Yet, this is rarely the case. As lawyers are overworked, what has been recorded might not reflect the value the fee earners have in mind. A natural evolution responding to this then is to make the next step common.
2. Fee earners review the draft invoice. The review is not a checking exercise but rather a mark-up and opportunity for fee earners to add their missed time. This places the productivity cost now on two individuals: the fee earner and the one drafting the invoice.
3. The mark-ups and changes are completed in the system by the clerk or administrative support person who originally drafted the invoice. Again, this individual may not appreciate the "why" for the specific changes and mark-ups they are enacting. This stage is prone to error, then, due to the standard approach being coupled with a non-standard circumstance.
4. The invoice makes it to partnership for final sign off. Many partners - especially department or firm managing partners - are involved in substantive legal work or legal supervision. As a consequence, often partners lack the capacity to reflect on and contemplate the invoice in front of them. A stage probably designed originally to capture errors before going out might just be contributing to more productivity cost. This time, at a Partner's hourly rate.
5. The invoice is finally sent. Good firms also have communication steps for fee earners acting to speak with clients when invoices go out. This goes a long way to reducing lock up. Others also have funds held in Trust but without effective client communication around billing, some invoices can be disputed.

Obviously the above are extreme examples but are all real processes around billing I have seen across hundreds of firms. Transforming the billing process to take back those productivity losses does not have to be difficult.

Improvement Through Process Mapping

One way is to engage in process mapping. This framework has been around for some time. It can involve complexity like swim lanes, or it can be drawn out as a simple flow chart on the back of a napkin.

The style of the process map does not matter as much as the activity's purpose. Drawing out the stages and touch points in any output is essential to identifying where the productivity losses (and gains) are in any given law firm process. It is not restricted to removing redundant steps or changing order, either. Process mapping can highlight areas ripe for automation, use of technologies like AI, and identify areas of legal supervisory risk.

See how a law firm eliminated 3 to 4 days from their billing process.

Let's Learn Legal Process Mapping!

If you want to learn more about legal process mapping, I'm hosting a complimentary workshop on Friday, 17 May at 12pm NZT / 10am AEST / 8am AWST. Numbers are limited to encourage participation and is for educational purposes only. The session is designed for anyone working in legal and wanting to build this skill.

Register here: https://bond.zoom.us/meeting/register/tJ0ufuChqzsrG9Q3577K1zGGClmzCOeLPkHD

If you want to know more about process mapping generally, here are some fantastic resources:

• What is a Six Sigma Process Map? - LSS Online - Purdue
• What is Process Mapping | Lucidchart
• Mapping Out Your Current Legal Process | Exigent group. (exigent-group.com)

If you find this newsletter useful, please consider sharing with a friend or colleague. If you're inspired and want to discuss, I'm open to all sorts of conversations around law, lawyering, technology and wellness.