5 Tips for Drafting & Enforcing Outside Counsel Legal Billing Guidelines

outside counsel legal billing guidelines
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Corporate counsel teams often rely heavily on outside counsel to protect their interests. With today’s shifting landscape and uncertainty, legal departments likely have to make difficult decisions on how to manage outside counsel spend to align with the changing objectives of their new corporate environments. In addition to their internal changes, new legal challenges and pitfalls are appearing rapidly across the globe. Ring outside counsel and managing the associated spend will be instrumental in confronting many of these problems.

One of the most effective ways to properly manage outside counsel is by developing, implementing and maintaining legal billing guidelines. These guidelines serve as a roadmap for firms to understand expectations, processes and procedures set forth by their client. Laying out specifics on what corporate counsel will pay for, preferences for how matters should be handled, or background on rate increases and staffing alleviates confusion or pushback when invoices are received.

Developing guidelines for legal billing requires a team to consider multiple factors — the law firm relationship, case management, ongoing compliance and billing/administrative needs. Guidelines simplify this process so that throughout the relationship and investment in the law firm, both parties are protected.

Here are five considerations for legal departments when drafting legal billing guidelines for their firms:

No. 1: Determine the main objectives.

Legal billing guidelines assist legal departments with controlling outside costs. The guidelines should include all non-compensable areas that have a cap, such as office overhead. Other helpful items to include are case staffing limitations, matter management and specific billing procedures such as key contacts and invoice cadence.

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No. 2: Anticipate confrontation.

Most executives don’t want to think about someone watching their every move. While outside counsel is truly a valuable partner to in-house teams, it’s still a business agreement. If a firm is potentially resistant, it’s important to remind them that the guidelines are standard practice. A clear conversation to discuss the purpose, goals and implementation should ideally keep any negative feelings toward the guidelines at bay.

No. 3: Include all priority information in an easily digestible format.

Being mindful and forthcoming about the process is key to creating and maintaining the guidelines. Think through all of the logistical needs that a firm will be handling such as who the invoices should be sent to, whether they are handled on a monthly basis, details on rate increases and more.

Just like other business documents, billing guidelines should be extremely organized – think bulleted lists instead of long paragraphs, a summary page with key takeaways clearly laid out, and categorized elements for easier consumption. The easier the document is to read, the more likely it is that firms will follow it.

No. 4: Enforce the guidelines.

So many legal departments have billing guidelines in place but don’t enforce them. Internal teams must have the right resources to ensure full compliance of their guidelines, as lack of enforcement can weaken a company’s position with outside counsel and set faulty expectations. Companies should feel clear in their decision to stop working with law firms that don’t follow the guidelines – after all, they’re put in place to protect both parties and help to establish mutual respect in the relationship.

One of the main goals of legal billing guidelines is to create a transparent process that works for each team. If a company is not able to keep up with the guidelines, or handle enforcement on their end, they can consult a legal spend management company to assist with handling maintenance of the law firm relationship.

No. 5: Update the guidelines as needed.

While a contractual document, the billing guidelines are very much subject to updates and change. Once a relationship begins, a company may realize items that need to be added or removed. Of course, there are always exceptions – such as the outlier from varying cases or issues. Having a semi-annual or annual review of the guidelines allows team members to spot items that should be adjusted as needs evolve.

Regular reviews of the guidelines assist legal departments in noticing items they might not have thought of the first time around or that change with time such as regulatory changes or travel time billing. What’s key here is having a process that shows thoughtful awareness of evolving needs and requirements.

Billing guidelines often include hiring protocols, such as what kind of attorney companies prefer to work on certain cases, as well as who should carry out each related task. Guidelines protect companies from getting billed for partners handling work that paralegals could be managing. Bill reviewers, whether internal or from an outside team, can quickly catch these issues to ensure rates are lowered to reflect the guideline protocol.

Creating, developing and implementing the right legal billing guidelines for an organization lets corporate counsel guide, control and mindfully monitor their outside counsel with all key considerations in one convenient location. In addition to helping keep an eye on key cost savings, the guidelines provide a streamlined solution for insight into billing, administrative work and staffing. By investing a little time at the outset of a new relationship (or in the planning stages), the right billing guidelines create a strong foundation to ensure the partnership is seamless on the administrative side so the firm can work on what they do best – comprehensively handling cases and being an extra asset for the internal team.

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