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Electronic Billing Presentment (EBP) for the Legal Industry
by Carl Mack of Client Profiles, Inc.

This white paper will outline the benefits, the technical challenges and the best practice considerations for design, implementation and on going support of E-Bill Presentment for the legal industry.

Law firms today are under greater pressure than ever to deliver more performance, more efficiencies, more profitability and more service to their clients. Corporate clients are demanding greater service, more accountability and dictating the method and style of invoices they receive.

Traditional Bill Presentment is a paper-based process that involves presenting the client with a paper bill for services previously rendered which is then paid by check. Paper-based billing is an intricate, time consuming process that involves billing operations, generating periodic reports from the accounting system, printing account statements, stuffing them into envelopes and sorting for mailing and delivery to the client via the US Postal Service. Most law firms have streamlined and improved their paper-based billing operations as much as possible; however, there are still issues of convenience, timeliness, cost and reliability. The process of printing bills assembling bills, delivering bills is time consuming and costly to firms since it is resource intensive. Traditional billing also lacks reliability because paper-based systems offer no guaranteed delivery mechanism. The cost of processing printing and sending bills can range from $1.50 to over $5.00 based on industry averages. The average bill takes 5 days to reach the client via US Mail. Errors in customer addresses may lead to significantly longer delivery times. Lost bills result in client satisfaction issues, delayed payments and late fees.

In contrast to paper based billing, Electronic Bill Presentment (EBP) uses the internet as a faster, less expensive, guaranteed delivery infrastructure to present bills electronically. EBP is the electronic presentation of statements, bills, invoices and related information sent by a law firm to its clients.

The internet provides law firms and their clients with new methods to deliver and access billing information. EBP represents one of the fastest growing internet applications because it streamlines the billing and invoicing process for law firms and their clients.

By 2007 it is estimated that over half of all bills will be paid over the internet. Customer demand for E-Billing has increased steadily over the last 3-4 years. Industry estimates indicate that 50% of customers would be willing to switch to an electronic presentment of their bill if the company offered it. With a more sophisticated customer comes an opportunity to automate and take advantage of efficiencies for both the firm and the client.

Both customers and corporations have realized that E-Billing is faster, easier, and more efficient. Recent multiindustry studies highlight some of the key trends driving this large-scale interest:

• 53% of customers would adopt E-Billing in the next 6-12 months.
• 71% of large companies desire E-Billing from their suppliers.
• 40% believe that E-Billing will reduce reconciliation costs and errors.

With this demand comes the opportunity to differentiate and lead your industry, gaining and retaining larger corporate clients who demand these services from vendors.

Few enhancements to your accounting system can have as dramatic an impact as E-Billing in improving your profitability and cash flow. Law firms and other businesses typically realize benefits for these initiatives:

• Reduce costs. By removing paper, mailing, and processing costs, E-Billing removes 30-45% in operatingcosts
• Reduce Staff time and effort to generate bills
• Accelerate cash flow. Faster collection and reconciliation improves cash flow by 20-30%.
• Improve real-time visibility into A/R trends
• Improve client satisfaction
• Improve your competitive differentiation
• Improved control over bill presentation for individual clients
• Enhance Security, Privacy of client invoices
• Greater Reliability, Guaranteed Delivery Receipt is immediate

E Bill Presentment has immediate impact on the paper and postage used to send bills. With only a small percentage of customers adopting E-billing a firm can save thousands of dollars. As more clients adopt E-Billing, the dollars spent on sending invoices and collecting money will reduce dramatically. BMulti industry best practice survey statistics show the potential decrease in costs:

• On average companies who implement an E-Billing solution will cut paper invoices or bills by 24%
• On average companies who implement an E-Billing solution will reduce paper payments by 21%
• On average companies who implement an E-Billing solution will receive 35% fewer billing related calls

What is the value of one day of outstanding AR? What would it mean to reduce the number of days that AR is outstanding by 3 days? Industry estimates indicate 80% of the companies who implemented an E-billing solution were able to reduce AR payment Days Outstanding.

The Challenge
Is the firm ready to take advantage of the time, labor and hard cost savings associated with E Bill Presentment? Are your clients demanding or receptive to the change in billing? What technical challenges must be overcome to implement the system? Is the current accounting system capable of delivering the information clients require in the format they demand?

More and more firms are faced with the challenge of complying with client E-Bill Presentment requirements in order to retain and solicit large corporate customers. This is no small task as actual applications of E-Billing are as varied as there are companies who have implemented it. One of the most difficult challenges facing law firms who must participate in electronic billing is that of constantly changing “standards”. Although several popular formats have been widely adopted, there are an inordinate amount of variations of these formats. This number is on the rise as each corporate customer defines its data collections requirements. This can place a burden on the law firm’s IT and accounting departments. As electronic billing becomes a requirement, firms are faced with the comply or lose business conundrum. As margins decrease across the board, adding additional staff or infrastructure to comply with customer billing demands becomes difficult with some accounting systems. E Bill Presentment provides a means to actually reduce costs.

Some Considerations
E billing scenarios fall in to one of three basic categories:

Electronic Document Submission – This practice simply removes printing and the US Mail from the equation. Under these guidelines, law firms will e-mail copies of the bills either as a Word Doc, a PDF or an Excel Spreadsheet to the client. In most cases this is done to reduce turn around time and to provide the client and electronic copy of the invoice they can absorb into either the document management or Accounts Payable processing system without the need for scanning. Hard cost savings in printing and postage can be significant.

ASCI File Submission – Many companies have engineered internal database applications to review transactional data on law firm invoices. These companies normally require bills to be submitted either as asci, text or CSV files or in some other precise format. Formats tend to be either an industry standard such as LEDES or some derivative. Sometimes however, companies create a wholly new format that must be dealt with by the law firm.

3rd Party Review –The review process has become so intensive that many companies have sub-contracted the review and approval process to specialized E-Billing monitoring services. Under this arrangement, law firms must submit their invoices (again normally ASCI, TXT or CSV) through a user interface designed by the monitoring firm.

Business rules built into this monitoring application look for billing exemptions (or non-allowables). When these exemptions are found bills can be either rejected in part or in whole depending upon the nature of the contract between the firm and the client.

To further complicate matters, some companies want invoices sent at the client level; all matters for the billing period included in one invoice, and some companies want invoices generated at the matter level (one invoice per matter). Some firms who require billing at the matter level will allow all bills to be submitted in one text file (as long as the billing formatting criteria is met).

E-Bill Presentment Design, Implementation and On going support
There are a number of things firms can do from a design and implementation perspective to ensure maximum benefits from E-Bill Presentment.

Time Coding – Since many of the business rules which determine whether bills get paid center around the coding of time, firms must ensure the are both policies in place and a time entry system that will enforce client specific rules for the entry of time and expenses. As an example, some clients may require the use of task or activity codes for time. Firms must ensure the time entry system requires these fields for customers who require this data. In addition, codes should be validated against customer specific lists (so that a task code that is inappropriate for a given customer cannot be selected at time of entry). Proper enforcement of client specific coding guidelines will drastically reduce editing time and errors resulting in bill rejection.

Prebill Style – Firms must provide attorneys with the tools they need to identify any problems in the client bill before it is sent to the client. Some clients may require fixed fees for certain tasks. If your time entry system does not support task based fee overrides, the prebill style should be able to identify errors. It is helpful to have a system that makes good use of bolding and underlines whenever problem conditions occur. As an example, a client may designate only certain attorneys to work on a given file. Your prebill should point out (in loud print) if an un-authorized individual put time in on the file. If your accounting system has the intelligence to aggressively look for potential problems, these problems can be corrected before submission occurs.

Bill Style – As previously discussed, bill styles vary from client to client. The system must be able to produce the bill style required by the client. One of the greatest strains on firm resources is the manual edit process to bring text files into compliance. If you have to manipulate the output from your billing system you are working too hard and wasting valuable resources.

Control Reports – A system should have a good method of tracking which electronic bills have been sent to the client, reviewed and paid. Many of the on-line services will provide this information from the client’s perspective, but it is up to the firm to make sure their records are complete and accurate.

Adaptation – As E-Billing matures, new and different formats will evolve. To keep pace with these ever changing requirements, your system needs to be flexible with regard to generating output. One way to guard against future uncertainties is to deploy systems which are built to accommodate change. These systems house data in commercially available relation databases such as Microsoft’s SQL Server or Oracle. Further, the reporting tool which extracts the data should be both robust and easy to use such as Crystal Reports from Business Objects or even Microsoft’s SQL Server Reporting Services now bundled with MS SQL Server. By having your data stored in a known format and by using tools that facilitate easy changes to reports and exports, your firm can ensure compliance with not only your current client’s requirements, but those that may develop over the next several years.

Conclusion
E Bill Presentment can be a valuable tool to increase cash flow, reduce costs and improve client retention. EBilling can facilitate automated analysis of the invoice. A properly designed E-Billing system can safeguard against data entry conditions which will red-flag your bill, can provide the bill in a format the customer expects and provide the firm with real reductions in the invoice to collection cycle for these customers. With a properly constructed e-Bill Presentment system, the firm can submit invoices directly to the customer or their monitoring service and reap the benefits of reduced labor, better client satisfaction and significant cost savings.