Why your legislation agency’s billing outsourcing is unhealthy for enterprise operations
As a practicing lawyer, you are constantly juggling the number of clients you have and using your legal skills to win cases. You have been trained for this.
And now, as a Senior Partner, you have been asked to take on the role and responsibility of the Managing Partner. With the role of managing partner comes a whole list of new business management requirements that we all know are not typically taught in law school.
As you digest and roll up your sleeves with that added responsibility, your first thought is to analyze and change everything, involve key people, figure out what’s not working efficiently, and immediately corner your company administrator on the procedural issues.
In the past, when law firms resist change, it is due to older partners and long-time employees who have the processes in place and fail to accept changes in technology, fear learning curves, or can accept the path of modern law firms as a virtual environment.
Your law firm has been in business for years and while everything seems to be working with clients running out of bills and money coming in, your knowledge of advanced legal technology and the dream of becoming known as a “boutique” law firm begin to disagree.
True to the old adage, “If it ain’t broken, why fix it?” Until now, no one has taken responsibility for analyzing procedures, evaluating solutions, or recommending changes. In the meantime, however, the employees keep grumbling to themselves, “There has to be a better way”.
As a managing partner, where do you start reviewing current processes to ensure that your law firm is being managed efficiently and performing at its best?
First, a full analysis of the processes and procedures across all departments needs to be performed to confirm that the workflows are in place so that employees are given the tools to meet customer needs. This may include reviewing your company’s practice management solutions and IT technology requirements.
Your first stop in your workflow review is the accounting department, where you will learn that the company’s time tracking, billing, invoicing, bookkeeping, and financial reporting tasks are outsourced.
You determine the average processing time to get invoices out the door at the end of the month, 7 to 10 days. That doesn’t even include the daily hourly rate your company pays for someone unfamiliar with your customer names to enter illegible handwritten timesheets.
You discuss billing processes with other managing partners in your network. They ask what has worked in their company and learn that they run the billing cycle in-house with strict procedures for monitoring and managing billable and administrative time.
You will also find out in your law firm that every lawyer is responsible for entering customer accounts and that they have sophisticated practice management solutions to make this process work. Accounting is responsible for creating invoices, posting payments, generating reports, and handling customer registration issues.
You learn that most companies do not outsource billing and tightly control their daily billable hours by managing them in-house. The billing process at the end of the month only takes 1 to 3 days.
You and the company admin will work together to create a plan to run the billing cycle in-house to improve the capture of more billable time and speed up invoice processing so that payment is faster.
To begin this process, critical procedures, tools, and technology must be in place prior to the transition. Time is money, after all, and for law firms, this is the dreaded inevitable task that hinders core revenue generation.
First of all, you must have the accounting staff to use the time to handle billing cycle responsibility. In most companies, the billing process should only take around 16 hours per month, depending on the complexity.
Law firms with LEDES e-invoicing requirements spend more time monitoring invoicing and post-billing, as well as auditing with the third party invoicing provider. In addition, the accounting staff open files, set up accounting procedures, post payments and work on collections while they monitor and report on the accounting performance.
Here are some recommended processes your company should follow to run billing in-house and take advantage of the benefits, control cash flow, and manage business operations on budget and forecast throughout the month.
Review the contract with the outsourced billing provider
- The outsourced supplier contract must be checked in order to confirm the “termination conditions” and the “out clause”.
- Review the cancellation policy and send a formal written notice. The billing services will be terminated at a certain point in time
- Create a timeline of events for the outsourced provider to run the final billing cycle and provide financial reports
- The timeline must contain the terms and timeline within which the provider can publish your company’s financial data. This date should be confirmed in writing
- Financial data must be provided in the predefined compatible format so that it can be imported into a practice management solution
To implement A cloud-based practice management solution
- Evaluate and implement a cloud-based practice management solution
- Purchase a license for all timekeeping charges and costs to customers
- Confirm that the Business Intelligence solution was built with a new user interface
- Confirm Solution has a mobile app with artificial intelligence that can efficiently record time and costs, track mileage and scan expense receipts anytime, anywhere
- Confirm reports and dashboards provide metrics to meet financial goals
Implement mandatory internal accounting procedures
- Adhere to strict company-wide billing procedures for timekeepers and billing managers
- The timekeepers enter the time directly when working on cases or administrative tasks
- Create abbreviations for consistent fee and cost descriptions to streamline day-to-day pre-invoicing revisions
- Generate weekly “Out of Time Reports” so timekeepers can review and confirm that all customer billable time has been entered
- Monitor the client trust account to confirm that the fee agreement requires replenishment
Optimize the pre-bill processes
- Have deadlines for billing managers to review and approve the timekeeper’s billable time and cost prior to the billing process
- Have strict deadlines where time and costs have to be entered, pre-invoices are created and flipped, and invoices are sent to customers
- Perform the spell check in the pre-invoice processing phase
- Make sure that the pre-invoices automatically sorted by the responsible invoice attorney are automatically sorted when they are generated
- Print pre-bills on colored paper (green or pink) to create a sense of urgency and easy to find lost pages when billing managers split the pile or pull pages aside (Trust me, no lawyer wants to get stuck with the green or pink papers on their desk at billing time.)
Set the guidelines for final invoice processing
- Take the time to flip drafts, create final invoices, and meet them on each billing cycle
- Email the final PDF invoices directly to the customer approving the payment or to the customer’s accounting department
- Provide a link for convenient online payment on invoices to expedite payments and grow sales quickly
- Confirm all billing guidelines for processing electronic or LEDES filings are met
- PDF and storage invoices in a separate directory to reduce overhead costs for print, postage and paper files
When analyzing outsourced billing cycles and workflow services, it becomes clear that there is no quality control and valuable income is flying out the door. Customer billing arrangements are not set up properly and certain invoices have to be recreated manually. Time entry descriptions require extensive revision as the outsourced provider is not familiar with your customer names or the case phase and details. These issues alone make the entire pre-invoicing revision process a nightmare for your accounting staff.
Additionally, billing outsourcing makes it difficult to identify timekeepers who are lacking time. If timekeepers don’t have the flexibility and convenience to enter work hours regardless of the time of day or location, your law firm will lose revenue.
It is proven that timekeepers who monitor their billable time minute by minute are capturing more billable time and expense. When timekeepers have the ability to enter their time efficiently, timing becomes a fun competitive game among each other to see how much time they can capture!
When you take control of your billing cycle by bringing it back in-house, your accounting staff can manage the company’s day-to-day running, payment receipts, and collections activities to determine your expected earnings and most importantly, manage your company’s business operations.
With instant access to billing information, customers are identified with matters where fees and costs are spiraling out of control and trust funds are low, so you can call for replenishment from your customer mid-month.
The detailed daily monitoring of the invoice data for active cases ensures the success of your daily cash flow.
Ultimately, client billing leads to revenue that is the bloodline for your law firm’s success. Although time consuming, the billing cycle related tasks are critical and require close monitoring and strict management. When you do this effectively, budgeting and forecasting for your company’s future business operations will be optimized and you will get one step closer to coveted “boutique” status.