In-house organizations are becoming more and more sophisticated at managing legal spend, as evidenced by a recent Wolters Kluwer’s ELM Solutions-sponsored panel at the Legaltech New York conference. Panelists Tariq Abdullah of Walmart, John Crawshaw of PNC Bank, and Glenn Vile of the Marsh & McLennan Companies talked for an hour about innovative ways they are using eBilling technologies to manage relationships with outside counsel, including invoicing and timekeeper diversity issues.
For instance, the panelists discussed the benefits of third-party law firm invoice review, including the kind of innovative AI-assisted human invoice review offered by Wolters Kluwer’s ELM Solutions. According to the panelists, the need for third-party invoice review arose as eBilling volumes increased and created an opportunity for GCs to ask for better invoice hygiene from law firms. That situation, combined with the rise of legal operations and CFOs expecting greater financial discipline from in-house legal, made third-party invoice review more attractive. Finally, growing understanding and acceptance of AI-assisted legal solutions piqued the interest of companies who came to view domestic AI-assisted human review as a viable alternative to sending sensitive legal data to overseas reviewers.
The panelists pointed out that the benefits of third-party review are many, including but not limited to:
- Reduction of in-house workload
- Another set of eyes to catch potential issues
- Improved invoice hygiene from firms, particularly reduction in block billing
- Identification of issues not apparent via human-only review or general rule-based searches
- Cost reductions of invoice line items that are inappropriate or insufficiently documented
- Cleaner invoice data, facilitating future data analysis
- Cleaner invoices get paid faster
An amusing point was made by PNC’s Crawshaw, who pointed out that third-party review (TPR) of invoices is now like Facebook in that “even grandma is doing it”—that is, it is becoming more and more commonplace in many types of organizations, not just the largest or most sophisticated ones. While most law firms have already had experience with some clients using third-party review, going forward they can expect the portion of their client portfolio using TPR to grow.
The panelists also talked about managing in-house review of legal invoices, which can occur on its own or at the conclusion of TPR. In either case, it is critical to ensure that in-house counsel and other invoice approvers carefully review invoices to ensure that all the charges listed are ones the law department ought to pay. However, due to time constraints, fear of damaging the attorney-client relationship, or a number of other reasons, in-house approvers tend not to do so. Training can remedy lackadaisical in-house review, and some organizations even pull reports out of their eBilling system that can show the number of seconds each reviewer spent reviewing each invoice. Using a managed service, like AI-assisted bill review, can significantly shorten the time it takes in-house reviewers to complete final invoice review, lessening this tendency to approve without scrutiny.
The panel concluded by talking about diversity and how organizations can use eBilling systems to track and report on it. Specifically, organizations are using technology like the diversity modules in Wolters Kluwer’s Passport® and TyMetrix® 360° to allow law firms to volunteer information about ethnicity, gender, veteran status, disability status, or other details about the diversity of their timekeepers. That then allows the law department to track the extent to which diverse timekeepers are used in terms of hours, dollars billed, or even specific types of tasks. By having visibility into which firms are succeeding in promoting timekeeper diversity and which firms are struggling, in-house staff can structure critical conversations with their providers and find ways for them to help the law department achieve its own diversity targets.
These practices may be more advanced than what is going on in some law departments, but that situation is changing. As more and more law departments start to be evaluated on the extent to which they are “run like a business,” they will come to see the value of more robust invoice review, including AI-assisted human review of invoices. Additionally, the growing industry recognition that invoice data can be used as a basis to analyze and encourage law firm diversity will make not having a robust, data-driven diversity program hard to justify. As techniques like the above become more and more standard, they may facilitate not only management discussions within the organization but also larger industry discussions that spread best practices across multiple organizations.