I’m an idiot. I really am.

When I was in private practice, clients said that they instituted e-billing for reasons of efficiency: “We can process bills and pay you faster if you submit bills electronically. E-billing speeds the process for both of us.”

I knew that bills that we submitted electronically underwent some kind of review. It always felt as though it was review by chimpanzee, as clients seemingly whacked hours randomly, leaving us with the hard choice whether to remain silent or quibble about a few bucks here and a few bucks there. But fundamentally I accepted the basic proposition that e-billing improved efficiency.

Now I know better….

(Actually, I don’t really know much better. I added a provocative sentence followed by an ellipsis so that Lat would know precisely where to put the break for the “continue reading” icon when he loads this post into the ATL blogging software.)

Where was I?

Oh, yeah: It’s true that e-billing solves many administrative burdens for corporate clients, and e-billing can in fact speed the payment of bills. But e-billing does several other things that I never really considered until I moved in-house.

First, e-billing makes it easier for clients to eliminate charges that appear to be improper (such as a firm having taken too many hours to perform a task or having assigned too many lawyers to a case). When corporate clients made those adjustments in the world of paper bills, the adjustments required an exchange of correspondence and a series of conversations to sort things out. When clients make those adjustments in the world of e-bills, the law firms are typically able to press a button and print a report of the disallowed charges. The firms thus see what was disallowed (and a short-form description of the reason for the adjustment) without the need for exchanges of paper and phone calls simply to set the stage for a conversation.

Second, e-billing makes it much easier for clients to track the fees that they’ve disallowed. In the days of paper bills, clients could track the hacked fees only by manually entering dollar values into a database. E-billing tracks the disallowed fees automatically. Needless to say, in-house folks are better able to take credit for saving a company money if they’re able to track the amounts that they’ve saved.

Third, the e-billing system can automate parts of the process for reviewing bills. If someone is manually reviewing paper bills, that person must remember all of the applicable rules: Is it a quarter, a dime, or a nickel for photocopies? What’s the rule for charges for computerized research? Who pays for cab fare home after a lawyer’s late night at the office? And on and on.

E-billing permits corporations to load their pre-set rules into the database, and the computer will apply those rules uniformly and accurately to all incoming bills, eliminating some of the tedium and many of the errors caused by manual review.

Am I pleased with this?

In one sense, sure. If we can speed a process and make it more predictable and measurable, that’s probably a good thing. And if the computerized process can reduce the amount of time that lawyers and clients must spend discussing billing issues, both sides would surely be pleased.

On the other hand, automated systems that unthinkingly cut bills can lead to unintended consequences. For example, some corporate clients refuse to pay for more than ten hours of a single lawyer’s time billed in one day unless the lawyer is physically at a trial site. On its face, that seems like an innocuous rule; after all, most lawyers become inefficient after billing more than ten hours in a day, and restricting payment may be a two-bit safeguard against lawyers padding their bills.

But, if a client absolutely refuses to pay for more than ten billed hours in a day, you can bet that outside counsel will be aware of that rule. Suppose a lawyer could schedule a jam-packed day, leaving the house at 6 in the morning, studying key documents on the plane, spending most of a day with a witness, and flying back on the 8 p.m. outbound, to arrive home, exhausted, just before midnight. Impose a no-more-than-ten-hours-a-day rule, and only the most devoted lawyer will schedule that trip, even if might make sense to run that gantlet for a particular client in a particular matter. Instead of working hard and not getting paid, the lawyer may well choose to leave home at a more civilized hour, work fewer hours with the witness, enjoy a leisurely dinner (courtesy of the client) on the road, stay overnight at a hotel, work with the witness for an hour or two the next morning, and then fly home mid-day. The computerized e-billing software will approve those charges, even though the client may well have incurred extra cost as a result of the conduct the rules encouraged.

I’m not taking sides here. I was outside counsel for a long time and I understand the billing process from that perspective. Now I’m in-house counsel, and I’m looking at the other side of the coin. Law firms should produce quality work for their clients at a fair price, and clients should not nickel-and-dime their firms over every time entry or expense that’s subject to quibble.

On the other hand, it’s probably worthwhile for lawyers and clients to think for a moment about how their e-billing process can help or hinder creating an effective working relationship.


Mark Herrmann is the Vice President and Chief Counsel – Litigation at Aon, the world’s leading provider of risk management services, insurance and reinsurance brokerage, and human capital and management consulting. He is the author of The Curmudgeon’s Guide to Practicing Law (affiliate link). You can reach him by email at inhouse@abovethelaw.com.


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