BILLABLE VS NON-BILLABLE HOURS: HERE IS EVERYTHING YOU NEED TO KNOW

By ALB In Legal On 03 Sep 2019

Unfortunately for law firms around the world, law schools do not spend as many hours as they should teaching attorneys about which activities or expenses are actually billable for, and which are not. More often than not, lawyers don’t even realise the importance of efficient timekeeping unless they are being chased down by their firm’s billing departments for clarifications on almost every single entry created by them. Timekeeping; to be more precise, effective timekeeping is something dreaded by even the most efficient of lawyers, especially given how inevitable it is should they wish to pave a successful legal career and bring their firms good revenue.

Although advancing technology has severely reduced the manual effort that goes into timekeeping, the invoices prepared accumulating these entries are filled with numerous errors resulting in extremely delayed payments, poor cash flow, having to write-off too many hours, etc. While an increasing number of clients is generally considered a boon for law firms, it also means that the number of billing guidelines that they have to maintain compliance with is significantly increased. For this reason, an increasing clientele can in fact mean worsening cash flow for the firms. Let me break this down further for you with a probable scenario:

Congratulations! Your firm just acquired 20 new clients-work has never been more exciting-the financial prospects have never looked so promising. Amidst the excitement is however, the growing anticipation among the timekeepers and the billing department: how are they supposed to track all the time being spent on working on multiple cases effectively and without error? How much additional workload is going to be imposed on the billing clerks who now have to check every additional invoice for errors and non-compliances? What follows is the preparation and submission of invoices that contain several non-compliances to various clients. These invoices, before reaching your clients or their TPAs have to go through strict bill review vendors and the extremely powerful technology they have in place exclusively to scrutinize your invoices, flagging you for every, even if slight, non-compliance there is. We can’t even blame these vendors here, the pressure on them to bring about at least 6% reduction on every invoice submitted to them is tremendous. As a result of this, your invoices are severely reduced. The clients refuse to pay you for your invoices unless they are fully compliant with their guidelines. This can be extremely frustrating, especially if the reduction isn’t that severe-imagine a payment of $10,000 being delayed just because the reductions amount to $600. The logical (not really) step for most firms here is to write-off these hours so as to hasten the payment. While the billable hours written off might not seem to be much when you consider it per invoice, on a larger scale, this places a highly negative impact on your firm’s financial health: poor cash flow, decreased profit margin, etc.

Surprisingly, the solution to all of these problems is rather simple and extremely effective. But we will get to that in a minute.

The billing department relies on every single timekeeper’s billing efficiency so that their effort to submit error-free invoices to the clients is fruitful. With manual timekeeping, this places a tremendous amount of stress on the attorneys who are expected to capture their time while providing specifications that are unique to guidelines, knowing which entries they require approval for, how much of an expense occurred is reimbursable and so on. The presence of numerous billing guidelines, hence, is more than enough to stress out even the most experienced lawyer. From the experience that I have gained as a former owner of a bill review company, I have realized that there are some things that are relatively common to most of the billing guidelines, things you must know are not billable without prior permission to do so directly from your client, in some cases, with a written agreement.

These include:

Research: Exclusive, case-focused research is usually billable, for which sufficient supporting documents and materials should be produced as well. Routine research work that does not specifically contribute to the development of a case, or the research work done initially for another case that has helped you develop this case is not chargeable to your current client. You should not be including research work that is done electronically either, on your invoice.

Multiple Attendees: At events requiring attorney appearances (e.g. witness interviews, court hearings, etc.) the presence of only one attorney is generally expected. So, unless you can prove the necessity of the work by proving that there is a work product that has been generated, separately for each of the attendees, your entry for multiple attendances is very likely to be reduced.

Travel: Travel at short distances are considered to be local travel and these are not usually reimbursed by the clients. Every client has their own specific minimum distance that should be covered that renders the travel ‘long distance’ and billable. While travelling using taxis, rail or by air, clients expect you to charge them only at economy or coach rates, or the equivalent of these and not higher. It is advisable to obtain approval from your clients prior to billing them for airfare and let them know as early as possible about your travel plans. Ideally, you are expected to anticipate and make travel plans well ahead of time so as to reduce unnecessary last-minute surges in fares. You should not be charging your clients for travel related expenses such as the cost of travel agencies, parking fees, etc.

Administrative Tasks: Tasks performed at clerical levels that do not require the expertise and knowledge of an attorney are considered to be your firm’s overhead expenses. Examples of administrative tasks include opening and closing of files, mail distribution, office maintenance, emailing, stamping documents, database updates, invoicing, etc. These however, if performed by paralegals or attorneys can be charged at paralegal rates provided you have obtained approval from your client in prior.

Intra-firm Communication: Communication done within the firm, through any means: fax, email, meetings, telephone, etc. should not be charged to your clients. Some clients however do allow billing for these just for the senior attorneys’ time.

Telephone & Fax Charges: Local calls, aborted phone calls, mobile phone calls and short distance faxing charges are non-billable items for most clients and the charges incurred for these shall be reimbursed only if your client or representative has previously agreed to reimburse you for them.

Besides these, entertainment charges, charges for office maintenance, routine postage, messenger services, etc are examples of overhead expenses that you should not bill for without approval.

Now that you have gained a generalised idea about what expenses are considered non-billable, you must realise that all of the above examples are applicable to most clients and not all of them. Furthermore, individual clients could easily have slight variations in each of their guidelines for the above as well, and you are expected to comply with even the smallest of these specifications.

Maintaining 100% compliance is hence not easy whatsoever, without the aid of up-to-date highly intelligent technology that can revolutionise the way time is captured and is a blessing to law firms’ billing departments everywhere. Accurate Legal Billing is built on advanced machine learning billing platform that ensures that each item entered by your timekeepers are automatically reviewed for compliance with the specific client’s billing guidelines. Irrespective of the number of guidelines and cases, by using ALB, your timekeepers shall capture their time perfectly such that they are entirely devoid of any error or non-compliance. Only entries that have been verified for compliance are passed on for invoicing to the billing department, who can then generate the invoices without having to spend hours cross checking the entries. The submitted invoices shall hence suffer minimal to zero reductions. The cash flow is improved tremendously, you no longer need to write-off your billable hours and you can sit back and watch your firm’s profit margin increase.

To know more about us and to schedule a detailed demo with us, click here.

About Andre Wouansi: Andre is a leading industry expert with over 15 years of experience as the Group CFO and one of the owners of a company that was the preferred bill review vendor for many insurance companies across the US, UK and about 80 other countries. Having reviewed millions of invoices worth over 10 billion dollars, he created Accurate Legal Billing Inc with the exclusive mission of helping law firms improve their cash flow, increase their profit margin and increase their billing efficiency by allowing them to prepare and submit invoices that are always 100% compliant with each of their client’s billing guidelines.