Ascertus discusses the adoption of E-billing tools – US versus Europe
This article was originally a guest blog by Bryan King, independent e-billing consultant.
Although e-billing is playing a role in the commercial relationship between a growing number of UK/European in-house legal departments and their law firms, there are still many organisations that aren’t yet reaping the benefits of e-billing. It’s often said that numerous non-US organisations don’t “get” the value of e-billing. I believe, it’s not that they don’t “get it”, rather the e-billing solutions, until recently, didn’t necessarily deliver against the needs of European organisations.
E-billing is a norm in the US
It is estimated that 90% of all litigation work is now e-billed in the US; and a recent study shows that in many mid-sized US firms, around 70% of annual revenue is collected via e-bills.
One of the key reasons why e-billing has been a success in the US is its single currency, the US Dollar. The e-bill format (LEDES 1998) is based on a single currency; and law firms and in-house legal departments don’t have to comply with a complex tax and regulatory environment, like in Europe. This facilitated standardisation of e-billing, and established it as a norm, becoming acceptable to lawyers and clients alike.
Europe sees the business value of e-billing
On the other hand, law firms and corporate legal departments in Europe faced significant barriers to the adoption of traditional e-billing solutions from financial, cultural and regulatory perspectives – and so, US market driven solutions proved inadequate to business requirements.
Are e-bills compliant with the various tax rules, regulatory bodies and legislations in Europe? Is the e-bill a VAT invoice as well as a note of legal costs? Does the e-bill comply with the requirements of the Solicitors Accounts Rules, HM Revenue & Customs, Data Protection laws, the Business Names Act and EU billing regulations? Law firms have to ensure that the e-billing intermediary system handles these issues correctly and that the e-bill as seen by the client complies with all the appropriate regulations. Therefore, on a technical level, organisations needed to accommodate several LEDES file formats, VAT and compliance issues, as well as a multi-currency, multi-jurisdictional billing environment.
Interest in e-billing started in earnest in 2003, when UK branches of US insurance and finance organisations started demanding such functionality from their regional law firms, which led to US e-billing solution vendors setting up offices in the UK. Over the past decade, many e-billing projects have been undertaken, with a number of law firms successfully e-billing their largest clients to the value of many millions of pounds per year.
On the corporate side, legal departments have used e-billing to make cost and fee cuts of course, but also tapped into it to develop a wider strategic relationship with their external law firms. The legal operations manager at a major retail bank that recently completed a high-profile e-billing project outside of the US, has been quoted as saying: “We believe it (e-billing) will make our in-house lawyers think more commercially. Are we putting the right resources on matters? What’s the selection process? We hope over time it will have a positive behavioural change.”
Similarly, a major transport insurance specialist has been motivated to adopt e-billing with an objective to reduce its law firm panel down from around 60 to between 5 and 12 firms.
Legal spend management – the most current incarnation of e-billing
Today, in-house legal departments and law firms are looking for legal spend management solutions that go beyond traditional e-billing in their functionality – such as ability to track billing information before the invoice is sent, monitoring compliance with client-agreed billing rules, ability to query disputed charges before billing, and so on. These latest requirements have led to the rise of new solution providers in not just the European markets, but in the US too.
In addition to e-billing, these web-based solutions incorporate a legal procurement module, which automates the issuance and evaluation of requests for proposals, demands for cost estimates and legal matter staffing plans. They offer sophisticated reporting and management information with easy to understand metrics and KPIs for corporate legal departments and the law firms. As these solutions integrate with other applications such as document, knowledge and legal project management and calendaring and such, often via standard e-mail interfaces, corporate lawyers and law firms have a connected business environment that also facilitates collaboration.
It is a matter of time before legal spend management solutions become a norm in the legal sector across regions and markets. The e-billing concept has evolved.