Compliance review is a vital component of legal spend management. Compliance review, in terms of legal spend management, examines law firm invoices and compares them with how completely they conform with the client’s billing guidelines. In depth compliance review requires knowledge of the law firm, the law firm’s billing experience, the common practices of the legal industry, as well as insight into the particular body of law that is being practiced. Although the specifics of the tasks and costs vary between clients, there are a few consistent methodologies used to review legal invoices for compliance with client’s billing guidelines, including the objective and subjective review of invoices. The objective review is usually a surface level review that looks at the basics of whether the bill itself is complete and made without errors, and the subjective review digs into the meat of the work being completed to see how appropriate it is in light of the client’s overall litigation goals.
The first review completed is an objective review, which looks at the surface level of the invoice for technical problems with the billing. Were the services billed on the invoice submitted within the correct timeframe? Does the invoice contain any mathematical errors? Are the timekeepers authorized, and are they billing at the correct rate? Was the proper support documentation provided for disbursements?
This type of review looks at the technical or procedural aspects of the billing. Objective review measures if the law firm has provided the minimum basic information, and checks that the calculations all add up. Most of the issues seen during an objective review can be identified through a basic ebilling solution, but there are also many areas where a billing clerk can circumvent the requirements to get the billing submitted.
A question we are often asked by new law firms that are unfamiliar with the comprehensive compliance review is “What UTBMS billing codes can we use?” These firms have learned that if they just use the correct codes, then their invoices will be accepted and paid. An objective review of legal invoices that relies on UTBMS billing codes will not identify non-compensable tasks that are being billed under the incorrect code. This is just one reason why it is important to incorporate a subjective review into your legal spend management strategy as well.
A subjective review will determine if non-compensable or improper work is being billed on invoices. With a subjective review, a legal professional looks at both the work being performed as well as the person billing it and considers if the work was appropriate or not. This type of review helps to ensure that timekeepers are working efficiently and not just working on their minimum daily quota of billable hours. This type of review goes beyond the simplistic way that UTBMS codes are used that law firms are able to supplant but also requires that the law firm bill full descriptions for tasks that do not cram a variety of tasks under the few codes that they know will be paid by the client.
The subjective review can be boiled down to a few questions: What work was being performed, and why? Was the time billed for this task appropriate? Should the work being completed be performed by a licensed professional? Was this work completed by an appropriate class of timekeeper?
In order for a subjective review to be completed, however, the law firm must give enough information for the task being completed to be identified. Tasks should be action verbs that adequately describe the work being completed: Review, draft, conference, correspond, etc. Depending on the type of task being completed, the timekeeper should give additional detail. For example, if they are reviewing, they should identify the documents being reviewed and the purpose. If they are drafting correspondence, they should identify the recipient and the purpose. Some tasks that lawyers are fond of using, however, are inherently too vague to adequately describe what is being completed. Some common examples are “Prepare for hearing” or “Attention to file” because it is impossible to know if the timekeeper was “Preparing” by having a conference call with another timekeeper or picking up their dry cleaning. Once we know what work was performed, we can begin to think about how much time is being spent on a task, and if the correct person is completing that task. (See my next article for more on time/task appropriateness).
Beyond reducing legal spend on an invoice level, objective and subjective review can provide substantial insight into outside counsel’s billing. In a data-driven world, this kind of actionable information can enable organizations to efficiently allocate their resources, save money, and even contribute to the bottom line.