It’s hard to get around the fact that in the business world, time is money. For law firms that adage is crystal clear. Client billing is one of those unavoidable tasks that is time-consuming and takes the focus away from serving customers and other core revenue-generating activities. However, it’s also critical. Often in a law firm, billing equates to dedicating one or two days a month to creating invoices, reviewing bills, and sending to clients. Additional time is also required for following up and for processing and recording payments. In all, the billing process means spending at least two days or 16-plus hours per month, on non-billable activities. Organizations could hire a billing manager to manage the process. But these positions can be expensive to fill. Let’s assume it costs a firm around $60k a year to staff that position after salary, vacation, medical, etc. If you think you can save costs by going the part-time route, that’s a decision that has its challenges too. Finding someone qualified and willing to commit to handling your billing work on a part-time basis, can be a risk. So then, what should law firms do that can’t justify bringing on a full-time billing manager and who also can’t afford to take the focus off client work for 16 hours a month? In a word: outsource.
Outsourcing billing and accounting responsibilities to a team of outside professionals can help law firms complete critical billing tasks at a fraction of the cost. Compared to $60K, the comparable monthly investment to utilizing an outsourced billing and accounting specialist can cost anywhere from $12K to $20K a year. Even on the high end of the estimate, that commitment is way less than half compared to hiring an internal billing manager. Also, when legal professionals outsource billing services, they offload conventional ‘timekeeper’ activities to specialists, which allows internal teams to focus on real revenue and firm growth. Other benefits from outsourcing billing tasks include reduced operating expenses, better cash flow management, higher fee collection rates, and overall peace of mind knowing client teams are 100%-focused on, well, clients. Let’s look at top benefits legal firms can expect when outsourcing billing tasks.
Leverage experience and expertise
One of the most significant advantages in hiring a billing specialist is that they have a firm grasp of Work in Progress (WIP) rules, compliance requirements, balance sheets, and income statements. And they have the experience needed to catch critical accounting errors before they impact the business. Look for outsourcing partners that use a billing and accounting software that you are comfortable using. By leveraging their expertise, your billing process will become much more efficient, accurate, and effective – leading to higher margins.
More cost efficient
As highlighted earlier, independent contractors can be a practical solution to keeping costs down. By outsourcing billing services, organizations can leverage a large staff that is dedicated 100% to billing activities. Legal firms can improve their operations and reduce costs with a specialized team that has the technology, knowledge, and best practices required to do the job correctly. Also, if you’re relying on accounting experts, they ensure that the technology is up-to-date and working properly, reducing capital investments needed.
Web-based billing offers flexibility to customers too
Web-based time and billing software also open up tremendous opportunities to improve efficiencies across accounting processes from a client perspective too. For example, individuals can enter their time and expenses as usual, and at the end of the billing cycle, your billing experts develop a draft of bills for each client. In most cases, draft invoices are emailed to managing attorneys for review and approval. Once final invoices are approved, they’re using clients preferred delivery method, i.e. email, mail or LEDES (Legal Electronic Data Exchange Standard) submittals. These services also allow law firms to accept additional payment options from customers, like a credit card, debit card or ACH. Then when payment is received, teams can allocate the amounts to the correct invoice. Having billing experts on board helps with time intensive LEDES appeals. Specialists can make the necessary adjustments required, freeing up internal resources for other work. Web-based billing and digital record keeping also make it simpler to compile and organize documents for tax audits and for meeting compliance rules.
Rather than investing in additional infrastructure or hiring full-time team members to keep up with billing and accounting rules, top firms are choosing to work with an outsourced provider to stay ahead of the curve. In addition to providing expert knowledge and support, outsourced partners also free up legal teams to focus on client work and to increase revenue. The best outsourcing strategies help organizations become more effective, efficient and empowered – arming legal teams with specialized services just where they need it.