Billing Transparency: What Legal Procurement Really Wants From its Law Firms, Part 2
I recently required the services of an attorney. I must admit that when I received the bill I was shocked — it was double what I expected. The attorney attached all the documentation to my invoice; included time spent on voicemails, emails, etc.; and provided the backup information needed in order to understand it. I reviewed it carefully; and sure enough, he was right.
Given this, I was happy to pay the invoice immediately and have recommended him to several of my colleagues. I might also add that the bill was sent to me immediately once the work was completed. That way, there was no memory lapse as to the value of the service he provided. I suspect that the same principle applies to most law firm clients.
In his 17 years of managing external counsel, Richard Brzakala, Director of External Legal Services at Canadian banking giant CIBC, has seen it all when it comes to how firms bill clients. “Whether it relates to legal work, staffing, budgeting or legal costs, clients have a very low tolerance for the unknown but yet have high expectations from their law firms on delivering legal advice without any billing surprises,” states Brzakala. “Nothing undermines a positive client experience more than receiving an unexpected, excessively high bill, or charges for disbursements that don’t make sense or appear to be egregious and unjustified.”
“Whether it relates to legal work, staffing, budgeting or legal costs, clients have a very low tolerance for the unknown but yet have high expectations from their law firms on delivering legal advice without any billing surprises.”
Brzakala has always recommended to firms that they adopt and practice the mantra of “no surprises” and to always be proactive and upfront with their clients on any billing issues that may potentially have an adverse impact on their relationship.
“Advance warning of billing charges or explaining unforeseen variances prior to issuing a bill should be the preferred modus operandi for a law firm,” says Brzakala. “If a flat-rate fee, budget or estimate was negotiated in advance of a matter, then a firm should stick to it and never bill in excess. The last thing that anyone wants to see are surprises on an invoice that embarrass a client and undermine the credibility and reputation of a law firm.”
Items that should Never be Included in a Legal Invoice
In my previous blog on billing transparency, I promised that I would provide details about what entries should not show up on invoices and some of the information that clients need to see. Here are what my legal procurement contacts say about the Top 5 billing “No-Nos” and advice on what should be included on an invoice:
- Six-Minute Billing Charges: Companies do not want to see several 6-minute billings. This is a red flag that lawyers are charging for every little thing that comes across their desk including such routine tasks as accepting a meeting request. Worse still is the practice of rounding up the charges to the next half hour. Clients watch for decimal places when checking invoices and the math needs to add up.
- Disregarding UTBMS Codes: This is a common practice among law firms that clients have on their radar. The Uniform Task-Based Management System (UTBMS) task code assigned to each invoice line item is tracked by clients and they do not appreciate having to call attorneys to review line items that contain multiple tasks. UTBMS codes are designed to standardize categorization and facilitate analysis of legal work and expenses. Using UTBMS codes provides more credibility and transparency with your clients. The UTBMS codes are currently going through a review as it is recognized that the codes need to be updated. In a separate effort, Toby Brown, Chief Practice Management Officer at Perkins Coie; and Adam Stock, Chief Marketing and Client Services Officer at Allen Matkins Leck Gamble Mallory & Natsis, are working with another group to develop an industry standard for matter type codes. These codes, used in conjunction with the task codes, will enable both law firms and clients to better understand the costs of various types of legal work.
- Overtime Hours: Most law firms post the number of work hours on their websites, i.e. 7 to 7.5 hours per day. Billing an excessive number of hours per day is not showing good time management nor is your work perceived as being done at peak efficiency. If your firm is charging a high number of hours per day you need to re-examine how you are staffing your projects — or your client will. On occasion, attorneys may need to work on a weekend. But every weekend? Not likely, unless you are overworked and under-staffed. Clients will likely question these practices either amongst themselves or call you on it.
- Double-Billing: A general counsel for a large financial institution stated that when they perceive an attorney is double-billing, they stop using the firm. I asked the GC if the company tells the law firm why they are not being used any longer, and she said, “No, we don’t have time.” Therefore, my advice to attorneys is to specifically itemize the tasks performed by different team members. Perhaps you are not double-billing, but perception is reality. Providing detailed backup information is an important step in building trust.
- Billing by Attorneys Not Up to Speed: Many in-house attorneys come from large law firms. They know when someone is charging time on a file that they are not familiar with and thus are not providing true value. Companies track all of the lawyers who are assigned to them and can spot a new staff member immediately. If you need to use an attorney who is unfamiliar with the file, then let the client know in advance and make sure your invoice reflects true value for the time the new lawyers spent.
One last point: timely invoices reinforce the good work you did before it becomes a distant memory. Billing practices are all part of building a long-term relationship with clients that is based upon trust.