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Four years into the century, and verbs beginning with “e-” remain hot. Electronic billing, or e-billing, has been a commonplace among businesses outside the legal profession for some years. It remains, however, a much more complex concept than the shortcut name might imply. The LawNet 2004 E-billing Survey has just been released, and the latest version outlines the obstacles faced by law firms using e-billing and the not inconsequential costs associated with it. LawNet Inc. is an independent network of legal technology professionals. It offers regional and national conferences, as well as numerous white papers and surveys that are published and offered on its Web site, www.peertopeer.org. Its latest e-billing survey discusses issues that will arise after the selection and implementation of an e-billing product, and the results were not necessarily happy. It should not scare firms from moving toward e-billing, but there appear to be greater benefits for the firm’s clients and fewer savings for the law firm than might be anticipated. WHAT IS IT? First, let’s clarify what e-billing is. It is not a business-to-consumer relationship, but rather involves two businesses sharing information, with the law firm transmitting, in an electronic format, data used to generate a paper bill. Sixty-seven of the 68 firms in the LawNet study use e-billing; about half have more than 150 timekeepers. This is surprisingly high, when compared with recent surveys. For example, a 2004 poll by LexisNexis Martindale-Hubbell and Corporate Legal Times found that 61.9 percent of law firm lawyers said their firms offered e-billing, while only 8.2 percent of the general counsels reported using e-billing. A 2003 report by Altman Weil found that 7.7 percent of law departments are using e-billing and 2.8 percent are making plans to convert. This percentage is slightly higher than LawNet’s similar 2002 survey, when 93 percent of respondents indicated they were doing some type of e-billing. NOT SIMPLE The new LawNet survey appears to debunk assumptions about the promise of e-billing. First, the simplicity offered by using standardized billing formats is elusive. Ideally, when the e-billing systems talk to one another, they share a common language. Two file format standards�Uniform Task-Based Management System (UTBMS) and the Legal Electronic Data Exchange Standard (LEDES)�have been created specifically to simplify these transactions. Yet only 36 percent of firms responding communicated with clients using only one format; 33 percent used two formats; and the remainder used three formats or more (the highest being 10). Many firms reported that they were asked to customize the base format to accommodate a client’s system, which not only defeats the purpose of the standard but also makes supporting the new version difficult for technology staff. These tweaks for each client put a spotlight on the administration and customization of the system. E-billing systems use templates to identify which data is to be transmitted. A new client may be able to use an existing template, which is simple to accommodate. But when a new template was involved, respondents indicated that an average of 127 hours and $1,485 was required to set up a new e-billing client. These are typically one-time costs, although 12 percent of firms had received as many as 10 change requests in the previous 12 months from a client, and 2 percent had received as many as 20 change requests. TIMING Respondents noted the lag time between a firm’s e-billing system being available to a client and that client’s termination of acceptance of paper invoices, during which the client would not pay. Only 18 percent of the firms reported that they could get through the setup process with a client, including having the client’s e-billing systems work, in less than 30 days; 35 percent reported that it would take more than 50 days. This potential income flux, which could be substantial if e-billing is being done at the request of a large client, will need adequate anticipation and is a process that the law firm should spend additional resources on to keep as brief as possible. OFFSETS E-billing is touted for its efficiencies in eliminating data entry errors and providing additional, detailed information. But these efficiencies are offset by an almost manual process to ensure the data going to the client is correct. The process enables a transmission of data to the client, whose system then typically validates task codes and billing rates. If the transmission fails the check, it is rejected, and the law firm must fix the errors. On average, only 19 percent of invoices had to be resubmitted. In this number lie a few significant issues for the law firm, where respondents noted that: •�91 percent clean up the invoice data before creating the electronic invoice file. •�90 percent manually modify the invoice file. •�81 percent spend time checking it for compliance prior to submitting it to the client. Law firms that commit to multiple formats and customizations place themselves in a position where the staff time saved in their finance departments may be eaten up by increased time used by technology staff�or may be a wash in finance because the person involved with paper bills is now cleansing electronic data. BALANCING ACT The most beneficial result of this survey is that it highlights the balance a law firm needs to engage in when considering e-billing. While clients seem to be the impetus behind law firms, big and small, moving to e-billing, they are not picking up the costs. Firms responding to this survey appear to be paying $68 per invoice in order to do e-billing. This includes the soft costs of time spent by staff to process the data. It also includes the vendor fees, which range from no cost for 10 percent of respondents to as much as $30,000 a year for 24 percent of respondents. It is worth noting that 75 percent of respondents’ clients were using an external vendor, to whom the law firm transmits its data. That vendor, through an annual fee or through a percentage of the invoice amounts processed of as much as 3 percent per invoice, is an ongoing cost for e-billing services. The total cost of e-billing over the past 12 months for respondents ranged from less than $10,000, for 12 percent, to more than $200,000, for 14 percent. This might make sense if the law firm were to move entirely to e-billing. But articles on the topic in the past 18 months typically note firms billing only as much as 10 percent electronically. The average firm in the LawNet survey sent about 5 percent of its invoices electronically. Electronic billing offers your clients a powerful tool to measure your firm’s work and it can help you stand out positively among your competitors at a time when general counsel have the reduction of costs as the No. 1 concern. The costs of getting into e-billing must be balanced against the business generated by the client demanding it and the additional soft and hard costs the firm will incur to maintain the system. The future of e-billing may be bright, but it will require your firm to apply a lot of polish and elbow grease to keep it that way. David Whelan is director of the Cincinnati Law Library Association. This article first appeared in the ALM magazine Law Technology News .

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