How Much Automation Is Right For Your Legal Invoice Review Process?
Well, while entrusting all of your legal and financial decisions to a machine certainly isn’t advisable, automation isn’t actually an all-or-none proposition. You can introduce it in gradual degrees to address specific inefficiencies.
To show you what we mean, we’ve illustrated the steps (and consequences) of a few invoice review workflows with varying levels of automation.
No Automation At All
Outside counsel emails an invoice to their closest point of contact within your legal team. That recipient may be a designated reviewer for the associated matter, but if not, they’ll have to forward the invoice to the appropriate colleague.
Once the invoice is in front of the correct reviewer, that person begins the tedious process of reading through what could be dozens of pages of legal service descriptions. Along the way, they’ll likely have to consult your legal billing guidelines for clarification. If they spot any missing information or unauthorized expenses, they’ll reject the invoice and send it back to outside counsel to begin the cycle all over again.
Whether amendments and corrections were required, or everything looked good the first time around, the reviewer eventually has an approved invoice ready to email over to your finance team. The invoice then gets recorded in your accounts payable system and processed during the next scheduled payment period.
Even the smoothest version of this workflow still leaves teams at a disadvantage. When faced with thousands of invoice line items to review amid an already busy schedule, no legal professional can be expected to devote equal attention to every single one. They understandably trade accuracy for productivity at a certain point. Unfortunately, the non-compliant costs they fail to flag and reject as a result can add up to a significant sum.
In addition to its limited accuracy, this entirely manual invoice review workflow is also prone to extensive delays. Even getting invoices into the right inbox can be a weeks-long process if the initial message is misdirected. Then building momentum from there is still highly dependent on the email management habits of multiple individuals.
These cumulative delays ultimately translate into unpredictable (and often late) payments. And in addition to the internal accounting headaches that will create, you can also expect growing tension within your law firm relationships.
Automation of Invoice Collection
In contrast to the manual process of exclusively submitting and forwarding invoices via email, legal departments can use e-billing software to centralize their invoice submission process.
The law firm submits the invoice through a dedicated system that automatically routes it to the correct reviewer. This process automatically removes any potential detours into inboxes, allowing for a single, direct collection point for all invoices.
While this approach to automation may seem minimal, it does offer valuable benefits. It eliminates the initial delays commonly experienced when invoices remain stuck in the wrong inbox, for example. As a result, your finance team can submit costs a lot faster, which means your law firms aren’t having to chase you for late payments. This helps to forge stronger relationships with your outside counsel due to the efficiency of the overall process.
Automation of Invoice Review Routes
This form of workflow specialization is a slightly more advanced approach to automation in invoice review as legal departments can use their chosen e-billing software to create multiple invoice review workflows.
Once a law firm submits an invoice, it can be automatically routed to different recipients depending on specific criteria, such as monetary threshold, practice area, or risk level. This approach works well for slightly larger legal departments with team members that have a wider range of specialized duties and expertise.
Utilizing this level of automation in your invoice review process would further improve its accuracy and reduce the time it takes to complete administrative work. This would also make the entire process a lot more efficient.
For example, you may want to establish an approval route exclusively for matter practice area and a separate route for risk level. The recipients of each would have the ability to review and approve these segmented invoices a lot faster as they would be under the same category and not bundled into one review path.
Automation of Invoice Rejection and Approval
Finally, legal departments can use e-billing software to encourage the invoices to bypass human reviewers completely in certain circumstances.
Using conditional formatting and “if, then” programming, this type of software provides a highly automated solution for invoice review. While this is a very advanced automation tactic, it still allows humans to maintain complete power as they can control the “if, then” rules themselves.
This method of automation is often used for auto-rejecting or auto-approving invoices in certain instances. An auto-reject scenario could be when an invoice is missing an ID number. Conversely, the software might auto-approve an invoice if the subtotal is less than a certain dollar amount, such as $2,000.
As this invoice review process employs a high level of automation, administrative workload (and time) can be further reduced by eliminating irrelevant notifications either from your legal department or your law firms. And, as meticulous as manual invoice reviewers can be, this level of automation eradicates potential human error, increasing the accuracy of the entire review process as a result.