E-billing is on the menu for law firms in England and Wales, and clients will probably demand it now they know that it can be properly delivered, says Patrick Collins


Commencement Order No.1 under the Legal Services Act 2007 took solicitors past an important e-billing milestone last month. Following representations from the Law Society to what is now the Ministry of Justice, the act amends section 69 of the Solicitors Act 1974 and allows solicitors to deliver their bills electronically.



Commencement Order No.1 brought this change into effect. While this aspect of e-billing may be news to some, UK law firms - far from being caught unawares - have long been preparing for it.



Relatively new to the UK, e-billing is an established practice in the US, where law firms of all sizes have been submitting legal invoice data to clients for more than ten years. The growth of e-billing in the US was helped by a variety of subsidiary factors, such as a relatively straightforward regulatory environment, the predominance of litigation-related advice and the impressive growth of third-party e-billing software vendors.



E-billing began in the 1990s as clients started to scrutinise their spend on external counsel in search of cost savings. Insurance companies, and then a wide range of organisations - major banks and corporates - began requesting that law firms move away from paper invoicing and transfer their billing data using electronic invoices.



The adoption rate of e-billing among clients was boosted by press reports which claimed that corporate law departments could expect savings of between 5-15% if they implemented the practice.



Capitalising on clients' wishes to make savings on legal costs, IT vendors such as DataCert and CT TyMetrix offered web-based applications, which validated incoming invoices against pre-determined criteria and rejected those where law firms had not adhered to these parameters. This approach increased the transparency of legal spend for client organisations. But firms regularly complained that the parameters they were being held to were sometimes vague and changes to them were not properly communicated. Though law firms did not have a problem with transparency or adopting new working practices, the advantages of e-billing were unclear.





Atlantic divide

With the US market maturing, and clients needing to scrutinise their legal spend outside the US, third-party e-billing vendors began exploring growth opportunities, in the UK and the EU. While major UK law firms gained more global mandates, the expansion of e-billing among UK firms was initially slow.



The profile of e-billing here grew steadily as major clients either began developing their own proprietary online systems, or embarked on implementing e-billing for their main legal suppliers using external suppliers. For the latter, this was in part due to companies' legal and compliance divisions in the US persuading or even directing their EU/EMEA counterparts to roll out e-billing as a legal spend management solution.



Unfortunately, the growth of e-billing in the UK remains problematic for all parties. Relations between law firms and IT vendors have sometimes been strained as firms felt left out of client e-billing implementations until they could no longer influence the process. Reinforcing the view of law firms that there was little to e-billing that would benefit them, IT vendors promised benefits to their clients which created work and overheads for law firms.





Taking the lead

Given the potential for growth in e-billing, the need to work together on common issues became clear. E-billing IT vendors have begun co-operating with law firms and dedicating resources to managing relationships with them. Gradually, the idea that global standards should be promoted as clients slowly adopted e-billing in the UK gained ground.



In the UK, many involved in e-billing expressed an interest in influencing these standards. On the back of this, law firms, clients and other parties began working on a variety of initiatives with the global e-billing standards body - the LEDES Oversight Committee (LOC).



The LOC had served the US market well on standards and had facilitated e-billing for US law firms, third-party IT vendors and clients alike. Its mantra is: 'Keep it simple; make it unambiguous; diverge from existing formats only if absolutely necessary; only ask for information the law firm is typically able to provide from their financial system; and meet the needs of corporations, law firms and legal industry software vendors to the maximum extent possible consistent with the first four criteria.'



Given the track record of the LOC in adhering to these criteria, the new UK e-billing players (including law firms, e-billing vendors and bodies such as the Law Society), see the LOC as the best way forward, and are in the process of forming a UK-based chapter so that all UK-based parties can influence the ongoing debate on standards.





Knowledge breeds trust

As law firms gain more knowledge, their entire approach to e-billing has changed. They are engaging more constructively with clients, regulators and third-party vendors. Whereas, in the past, law firms felt e-billing was forced on them, they are now acting as advisers to their clients at all stages of the e-billing roll-out process. Some may even try to use their approach to e-billing as a competitive differentiator.



The approach of clients has changed also. They look more objectively at e-billing, having realised that its implementation will not be as easy as first thought, and roll-outs remain in stasis, waiting for various obstacles to be removed.



The legislative changes of 7 March are a step in the right direction, but ultimately the costs to clients and the energy needed to commit to an e-billing roll-out, (which can last many months) might end up delaying e-billing in the UK even further. Everyone knows that e-billing in some form is coming, but when it arrives and how much it actually helps clients remains to be seen.



Patrick Collins is London finance manager at magic circle firm Allen & Overy