Rethinking Billing: The Law Firm’s Most Tedious Task Is Ripe for Disrupting

The law firm business model: simple. Record time, bill time to client, collect fees for time. Wash, rinse, repeat.

The Traditional Billing Process

So simple. Why do we make it so hard? For most lawyers in most firms, the first two steps are completed as follows. A lawyer or legal professional does a task. They write down or dictate to their administrative assistant what they actually did and how much time they spent doing it. The administrative assistant transcribes what was done. The lawyer or legal professional reviews what was transcribed.

The reviewed transcript is then sent to central accounting. At the end of the month, central accounting prepares a pre-bill of all the work done for a client on a particular matter. The pre-bills are sent to the billing attorney for the client.

The billing attorney reviews the pre-bill to see if it looks and sounds right. (And, in some cases, whether it complies with any applicable client billing guidelines). The attorney sends the pre-bill back to accounting, which prepares the final bill. The final bill is sent back to the billing attorney for a final review. And then voila. The bill is sent to the client.

Do you see any place where something could go wrong? For a process that is the only way a firm and lawyers make money, it is way too complicated and way too error-prone.

What Could Possibly Go Wrong?

Let's look at the process critically. First, all the time the lawyer and legal professional spend on the billing function—recording the time, reviewing the time, reviewing prebills, and revising final bills—is nonbillable. For all the time spent on billing, the lawyer and law firm gets 0. Nothing. Its really worse than 0 since the lawyer and legal professional could spend that non billable time on billable matters.

Secondly, creating a bill that accurately describes the work that was done and, in some cases, why the work was done could be critical to getting paid. How can we expect a client to pay a bill they don't understand; often, they don't or won't. Nothing will anger a client more and hurt your relationship with them worse than sending them a bill they don't understand. Or sending them a bill that doesn't explain why the work reflected was important.

So, given this, what often happens? The lawyer or legal professional doing the work is often busy with billable work. They are trying to meet deadlines and put out fires. All too often, this means they postpone recording their time. Sometimes, it's postponed to the end of the day. Sometimes its postponed to the end of the week. I've known lawyers who try to record all their time for the month AT THE END OF THE MONTH.

All this postponing means the lawyer or legal professional will forget. They will forget what exactly they did and why. They will forget exactly how much time they spend. And because they are busy with billable work and are trying to get all their time in hurriedly, they will not take the time to create good, sound entries. The kind of entries that describe what was done in enough detail that will make the client if not happy, or at least not outraged by what they see or don't see. (This assumes that if the timekeeper was not trying to recreate what they did hurriedly from memory, they could and would create a good description if they took the time.

And don't forget about the billing attorney who has to review the pre- and final bill. These attorneys are likewise busy with billable work. Like the timekeepers, they probably have mounds of bills to review and get out. They sometimes don't really know from the descriptions what was actually done. So they procrastinate or they get in a hurry. Trying to chase down timekeepers to get a better handle on what was done is a royal pain. So bills pile up

Billing Problems Begat Collection Problems

At every opportunity, there is a chance of delay. Delay is a real problem for a whole lot of reasons. It goes without saying that you won't get paid if you don't send a bill. (if you know of a client who will pay without being billed, let me know).

As time goes on, clients too, forget what was done; they perhaps don't remember how the work led to a good result. The delay messes up their budgets. They often aren't in any hurry to pay in any event.

Which leads to problems with the third part of the law firm business model: collections. Delays and problems with bills lead to problems with collections. To state the obvious, problems with collections mean reduced cash flow. Reduced revenues. Reduced profits.

The Billing Paradox

And before we chastise the lawyers and legal professionals, remember that they have other work to do. They are representing clients to whom they owe obligations. They have court deadlines to meet. Many of them have billable hour quotas from the firm that they need to meet. Billing takes time to do well, time that takes away from billable time. It's a paradox: billing is the only way lawyers make money, but most timekeepers hate doing it. Lawyers feel with justification it's not why they went to law school.

So, with all that being said, why do we make the process so complicated? Why do we have a process that puts so much pressure on already stressed timekeepers? Why do we have a process that takes timekeepers away from tasks that make money to do administrative work for which the timekeepers are overqualified in any event?

No wonder so many lawyers and legal professionals hate billing time. Let's face it, for something so critical, it's a royal pain in the ass.

A Better Way

The answer to the billing paradox is not there is no other way to do it. The solution is to use automated time entry and artificial intelligence technologies that are already available. These technologies make the whole billing process easier and more efficient. They automate the process and create the bills with much less human involvement. AI and Generative AI tools can take over the parts of the billing process those tools can competently do. The work that lawyers and legal professionals don’t need to do and which they detest.

Smokeball's automated time entry program for example runs on timekeepers’ computers in the background. It can observe what was done and how much time was spent. It can then create the initial time entry instead of a human timekeeper. Not only that, it can learn the timekeeper's style and create the kind of time entries that will look better to clients. The time entries that better describe what was done and even provide justification. It can learn the language that individual timekeepers want and like to use.

It's Time to Disrupt the Billing Process

The advantages of this kind of system are obvious. No more trying to remember what was done a week or a month ago: time is all recorded contemporaneously with the work. That also means that the recorded time spent is accurate. When timekeepers try to record their time from memory, two things can happen, both bad. Either the timekeeper forgets the amount of time they spent or even forgets that they did the task altogether. Or they think it took them more time than it actually did. The former results in money being left on the table. The latter risks bad client relations and decreased collections.

Automated time entry means less stress for timekeepers, better task descriptions, and, in the long run, better collections and better client relations.

That's a win-win.