Maximizing Efficiency: The Value of Standardized Legal Billing Data
Many lawyers and legal departments are now familiar with billing codes and electronic invoice submissions.
For example, Uniform Task-Based Management System (UTBMS) codes are a means of classifying legal services and expenses for the purposes of billing.
Similarly, when task-based codes like UTBMS are required, the Legal Electronic Data Exchange Standard (LEDES) is used as a means of uniformly formatting law firm invoices for electronic submission.
These and similar frameworks have been in used for roughly 20 years to bring uniformity and standardization to the billing of legal work. However, those who see the implementation of task-based coding as a mere client-pleasing exercise are missing out on useful information for their firms.
The increased standardization of task-based coding and electronic invoice submission makes it easier for both clients and attorneys to get a full strategic and financial picture of what a legal matter entailed. This is a sentiment echoed by the author of a recent Illinois Bar Journal article:
When it comes to optimizing your practice, do you trust your gut? Don’t. If you aren’t using data to measure what works and what doesn’t, you can’t be sure you’re winning the game. The good news: your practice generates the data you need to gauge success and adjust as needed.
In fact, allowing billing data to be used for business analytics was the intention of UTBMS and LEDES coding.
Task-coded billing information can be used to maintain or adjust how other matters are handled in the future to achieve the most favorable outcome with greater efficiency.
The Benefits of Task-Coded Billing
The UTBMS and other task-based coding regimes were designed to create an easy to follow, “all cards on the table” account of what work and expenses a legal matter required, and how much each step in the process cost the client.
With this information, the client knows exactly what they are getting for their money, and the law firm can extrapolate how best to allocate their resources going forward.
For example, a recent article in the International In-house Counsel Journal highlights the utility of task-coded billing:
[A] process that provides for actionable information from that data is central to being able to manage a legal department strategically and with greater efficiency. This is why the Uniform Task-Based Management System (UTBMS) code set is critical when looking at process improvements.
The creation of task-based coding regimes like UTBMS was clearly a step in the right direction toward transparency, and the ability to extract actionable meaning from billing data.
The Problem of Human Error in Applying Billing Codes
Even though various billing code systems like UTBMS retain the potential to maximize transparency between client and attorney, the reality of their implementation is often a mixed bag.
Various legal tech applications curb some of the difficulties involved in task-coding billing entries. There is no shortage of law firm billing applications that support UTBMS coding and LEDES formatted invoicing. Clio, Rocket Matter, PracticePanther, Actionstep, and Timeslips are just a few of the most popular examples.
Clients interested in tracking invoices and payments, and conducting internal data analysis would likely appreciate applications like Thompson Reuters’ Legal Tracker (Serengeti), LexisNexis’ CounselLink, and Wolters Kluwer’s TyMetrix 360°.
Still, although these systems support UTBMS coding and LEDES formatted invoicing, they usually requires a manual selection process and clunky pull-down menus to find the corresponding code for each time and expense entry.
Manual processes inevitably involve human error. Incorrect codes and idiosyncratic coding choices create the same vagueness and miscommunications the standardized system was designed to prevent. Although the uniform coding and categorization systems themselves are sound, improper implementation effectively nullifies the benefits.
Considering the vital importance and potential boon generated from accurately formatted billing data, inaccurate coding clearly has the potential to be disastrous. Imagine basing strategic or financial decisions on faulty information.
This fact is illustrated in a recent Inside Counsel article as follows:
While technology is requisite as an enabler for managing legal invoices, effective control rests on the creation of robust billing guidelines and accurate data collection… factors like the development of robust billing guidelines, the strict use of UTBMS codes, and the subsequent review of every line item of every invoice for conformance to your billing guidelines are prerequisite.
In other words, law firms and clients will see returns on task-coded billing data based upon what is manually entered.
Although many applications make it easier to bill in whatever way a firm chooses or a client requires, it is the consistency and accuracy of the billing codes that will determine how useful the billing data will be.
How to Ensure Actionable Billing Data
New advances in machine learning and other software technologies are already being used in the medical industry for coding physicians’ notes and other categorization tasks. These same technologies provide the promise of ensuring actionable billing data for law firms and their clients.
[C]urrent technology advances are providing opportunities to better measure, manage and optimize legal spend, even while leveraging conventional management tools… These advancements are expected to enhance management activities for both corporate law departments and law firms, and potentially allow the promise of activity-based management for legal activities to become better realized.
Indeed, computers process data the same way, every time, and with greater accuracy and speed than humans. For example, studies have demonstrated that predictive analytical tools can outperform unassisted attorneys in deciding the efficacy of a claim. A challenge by Case Crunch recently showed that the computer had an 86.6% accuracy level, while the human participants achieved only a collective 66.3%.
Using computers to handle the coding of billing entries cuts down on the non-billable time it takes to create invoices. But perhaps more importantly, automating the process of coding legal work also prevents human errors and idiosyncrasies, thereby standardizing the categorization of billing data.
Many attorneys are familiar with task-based billing codes as a means of keeping their clients happy. The fact that coded bills are often client requirements, as opposed to a proactive decision by a law firm, should not detract from the goldmine of information and utility available in a law firm’s own billing data.
Recent advances in technology provide a number of tools for law firms and legal departments to improve efficiency. Not to be overlooked is the analysis of standardized billing data, and its value in optimizing a law firm or legal department’s operations far beyond just billing and legal spend.