Automation is legal technology’s greatest gift to the legal profession. Practice management systems, case management systems, and smart contracts are now common tools law firms use to reduce costs and increase efficiency. Artificial intelligence, machine learning, and legal data analytics have improved the way lawyers work, allowed them to reap the benefits of a data-driven practice, and developed an overall sector-wide culture of innovation. As a result, many law firms have said goodbye to excel spreadsheets, manual processes and filing cabinets, especially in legal billing and invoicing. This article highlights the transformation of legal billing in the legal sector, the benefits of automated invoicing solutions and how new billing methods are here to stay.

What is e-billing software?

E-billing is the process of electronically delivering invoices or bills rather than sending a physical copy to a client by post. E-billing software automates submitting, reviewing, and approving invoices at a law firm [1]. Law firms that have put e-billing software into practice are operating more efficiently and experiencing considerable administrative costs reductions. One of the most important features of e-billing software is the automatic production of an electronic file that includes all details regarding the client, the case information, billing totals, timelines and expense codes, making sending and paying bills much easier and faster. These details are then coded against the relevant expenses to assist a law firm’s accounts department to save time and reduce costs [2].

What is legal spend management?

Legal spend management tools are best for in-house legal departments that outsource work to law firms. Through legal spend management software, legal departments can manage their outside counsel spend more cost-effectively and manage firm selection and engagement [3]. Not only does legal spend management software ensure visibility of spending, but it also identifies and actions cost-reduction opportunities to budget for future spending [4]. Medium to large-sized in-house legal departments process thousands of invoices from law firms every year. Suppose they do so without a specialised invoicing system or attempt to manage it manually. In that case, the entire process becomes extremely overwhelming and creates confusion resulting in either overpayments or missed payments [5].

How Do They Work?

Legal Electronic Data Exchange Standard

Law firms are required to submit their invoices in Legal Electronic Data Exchange Standard (LEDES) format, which allows the software to translate and process details about the invoice. Those law firms that have put this into practice have experienced significant reductions in their administrative costs and have collected and analysed large volumes of data to generate future insights [6]. The automation process requires law firms to submit invoices in a consistent LEDES format, enabling automation invoice review and consistent data collection for processing. Not only does this save legal departments their time, but it generates more profits from increased productivity, making data-driven decisions and eliminating invoicing errors [7].

Uniform Task-Based Management Systems

The Uniformed Task-Based Management System (UTBMS) is a legal billing methodology that uses codes to organise legal work and the associated accrued expenses. This system is commonly used alongside LEDES, the format through which invoices are processed. These are then analysed and classified using the UTBM system [8]. The integration of UTBMS resulted in increased clarity and standardisation to legal billing, allowing for more extensive data analysis for law firms who use this data to improve their efficiency and productivity levels. Lastly, the standardised nature of these systems makes it easier for clients and law firms to track their expenses, generate data on reliable pricing and use this data to implement cost-improvement strategies [9].

Why Are Manual Legal Billing & Spend Management Methods Inefficient?

Legal billing and spend management are among the biggest challenges facing law firms and in-house legal departments due to inadequate time tracking and complex invoicing procedures, which are prone to human error [10]. 

Manually taking time for invoicing purposes is an extremely slow, frustrating process that wastes a lawyer’s time. The inconvenient nature of the process makes room for human errors such as typos such as the wrong number or date being entered, resulting in incorrect, late and missing payments. In some cases, if a client finds such errors in an invoice, they may be reluctant to make the payment or completely refuse to pay it, resulting in billing disputes [11]. This entire fiasco causes major delays and disruption across and is a huge inconvenience to both the client and the law firm. 

Automated billing solutions can avoid these problems as the use of automation, machine learning, and artificial intelligence in the legal sector has transformed how invoices are paid and received. No longer would lawyers have to waste their time resolving billing disputes and dealing with delays due to invoice errors.

How does modernising invoicing and billing benefit law firms

Machine learning and artificial intelligence capabilities within legal billing software and spend management tools provide the perfect solution to avoid these problems. Automated invoicing is a more accurate and efficient billing method that saves time, reduces the likelihood of errors being made and improves the overall customer experience for the client [12]. Such software processes the firm’s internal data to generate automated notifications for when firms may go over their allocated budget for a particular project or simply alert a client about an upcoming payment. Such small details have a huge impact on the firm’s operations and ensure that the client billing process runs smoothly.

Invoice Error Identification

Automated invoicing and legal billing software identify errors and inaccuracies when invoices are sent to clients or received by other parties. Invoicing inaccuracies can be detrimental to legal practice as clients expect accuracy and consistency, especially when it comes to billing. Any inconsistencies will result in loss of clients and business, which impacts the firm’s overall profitability [13]. The quick and accurate nature of automated billing ensures that payments are complete at a much faster rate by identifying possible points of contention before they may cause a client billing dispute [14]. Lastly, invoice error identifications avoid the risk of committing invoice fraud by charging for services that were never provided or making clerical errors when rounding up invoice amounts.

Saves Time

The legal billing and invoicing process can be quite tedious and time-consuming. All the time lawyers spend on the billing process is time not spent on billable hours when completing tasks for clients. Streamlining this entire process allows lawyers to focus their time on more profitable tasks for the law firm [15]. Complicated billing procedures significantly reduce efficiency and lead to late invoicing and receiving late payments from clients. This results in more time chasing clients with overdue payments and correcting invoicing errors. This process forms an unprofitable cycle where there is an opportunity cost between completing billable tasks or fixing administrative invoicing procedures and chasing clients for late payments [16]. However, automated invoicing is the perfect solution for such problems. Automating the procedure ensures invoices and reminders are sent automatically regularly. Moreover, this eliminates all the administrative aspects and issues associated with excel spreadsheets, and the software is programmed to keep track of all invoices sent and received.

Automated Invoice Reviews

Automated invoice reviews involve identifying and fixing any errors before invoices are sent to clients. Artificial Intelligence-based invoicing software learns from a law firm’s invoicing and billing data to confirm whether an invoice entry aligns with the firm’s budget. These legal technology solutions identify billing irregularities outside the firm’s budget for a particular matter [17]. Lastly, automated invoice reviews notify the firm’s timekeepers and managers of these issues before the final invoice is generated, allowing the opportunity to correct the mistakes before any billing inaccuracies affect the firm [18].

Prescheduled Payment Reminders & Client Portals

The legal billing software allows law firms to benefit from features such as pre scheduled payment reminders and client portals. Law firms can set up pre scheduled payment reminders to alert their clients regarding upcoming and overdue payments. Setting up these reminders is extremely simple as they only need to be programmed once. Clients are also more willing to pay firm invoices quickly if a convenient payment process is in place. Integrating client portals in the payment process makes a client’s life much easier. A client portal simply automates the payment process by quickly reviewing completed work and making the necessary payments [19].

Improved Transparency & Client Trust

Legal e-billing software significantly increases transparency in the whole payment process due to the use of the Legal Electronic Data Exchange Standard (LEDES) format. This digitised billing process shows the client a line-by-line, itemised invoice breakdown, enabling them to understand what each charge is for, resulting in quicker approval and payments [20]. A major benefit of this improved transparency is the development of stronger client trust resulting in fewer disputes, more referrals and repeat business without spending excessive amounts on marketing and advertising [21].

What features to look out for in automated billing software

Choosing an automated billing software that meets the law firm’s specific needs is extremely important. In doing so, the following aspects of automated billing software should be looked out for.

Advanced-Data Security

When choosing billing software, law firms should consider their level of data protection within their law firm database where sensitive client information is stored and protected from hackers or employees with unauthorised access [22]. Automated billing software requires this confidential information to process the data and create invoices. Therefore, Law firms should prioritise billing software with the right security measures to collect, store, and process sensitive information. Not only is this an important ethical consideration, but it also reduces the risk of any data breaches that may damage the firm’s reputation.

Customisation

Having a tailored-fit legal billing process that meets the firm’s requirements and is in line with the firm’s existing operations. This feature ensures that law firms do not have to change their processes to adjust to a particular invoice template. It is the other way around; an invoice structure is specialised and designed for the firm’s use to ensure the template works for its existing procedures. Lastly, having a unique billing software is an aspect that sets law firms apart from their competitors and is a selling point for clients that are looking to work with a firm that has a more suitable payment process [23].

Automated Time-Trackers

Time tracking is key to invoicing and calculating a firm’s billable hours. Legal timekeeping and billing software allow law firms to save their billing time, making time for lawyers to work on more valuable or profitable tasks that cannot be digitalised [24]. Having automated time-tracker assists in recording and monitoring the time spent on a project resulting in a more accurate bill for clients. This feature is beneficial for both law firms and their clients as it ensures that law firms do not overcharge a client or that a client does not underpay the law firm.

Final Words

A law firm’s finances are the pillar of its growth. Therefore, it is crucial for law firm management to implement processes that eliminate billing errors and discrepancies to ensure client satisfaction. Innovative tools like e-billing software and automated invoicing allow law firms to work more efficiently, giving them more time to work on billable tasks instead of fixing invoicing errors, chasing clients for overdue payments and dealing with rejected invoices. Legal billing software allows law firms to manage every financial aspect of their practice with a few clicks, making the process extremely easy and efficient. Such advanced legal solutions are transforming the legal sector by increasing law firm productivity, streamlining operations and eliminating inefficient processes.