Creating Effective Billing Guidelines

Think of your relationship with outside counsel as a dance. The performance is flawless when both partners know the steps, rhythm, and pace. But even minor missteps can lead to a tangled mess. Legal billing guidelines are the choreography that ensures both parties are in sync.

Crafting effective legal billing guidelines, also known as outside counsel guidelines (OCGs), is a cornerstone for ensuring smooth collaboration, clear expectations, and optimal outcomes with your external law partners. Whether revisiting outdated guidelines or setting them up for the first time, this comprehensive guide will lead you through the essential steps.

Review Your Billing Requirements

Apart from your outside counsel, who are key players in ensuring that your billing guidelines are followed, your finance team and in-house lawyers are the real stakeholders in your new legal billing guidelines. Make sure to consult those groups as you’re writing this document.

Talk to your finance team about what billing requirements they need outside counsel to follow. For example, they may have specific invoice formats or accrual submission rules to abide by. Talk to them about common issues leading to delayed invoice payments or rejections. Make sure your guidelines explicitly cover these issues.

Meanwhile, your in-house counsel will be most concerned about speeding up the invoice review process. Collaborate with your team to shed light on what’s worked and hasn’t in your outside counsel billing and where there’s room for improvement within invoice review. Ask your team what they typically check for in invoices.

Your attorneys will have many experiences and anecdotes about what your guidelines should and shouldn’t include. They’ll help identify gaps where it is essential to have concrete guidelines to better shape the output from outside counsel.

You should also scour your engagement letters with law firms for specific rules you may have used in the past. It’s better to include these rules in a unified set of billing guidelines rather than trying to manage them for each engagement.

If you already have guidelines in place that you’re trying to improve, it’s important to understand the context behind each of these guidelines. For example, take the time to learn about particular situations or matters that prompted the team to implement certain guidelines. From there, decide if that guideline is generally applicable and still relevant.

Align With Best Practices

Though only some industry standards will perfectly match your company’s billing guidelines, exploring how other legal ops experts have tackled this question is a good idea. These best practices generally land in one of four buckets.

Resourcing Guidelines

These guidelines are all about who at the vendor works on your matter and what tasks they work on.

It’s important to use these guidelines to ensure timekeepers work at the top of their skill set, doing tasks only they are suited for. Firms should be required to delegate lower-level work to associates with less experience and more affordable hourly rates.

Activity Guidelines

Only about one-third of the hours worked by outside counsel are billable, according to a 2022 survey of 1,100 attorneys. The rest of their time includes basic legal research and time spent ‘reading in’ new attorneys to the matter and catching them up on current status and administrative tasks.

All that extra work is necessary for the firm to function efficiently, but it doesn’t mean you should be paying for it. Activity guidelines set expectations about what activities do and don’t count as invoiceable work.

Commercial Terms

Your billing guidelines must also address the foundations of your law firm relationships. They should lay out the agreed-upon billing rates for partners and associates and also require proposed budgets for each phase of work.

It’s also a good idea to establish a regular cadence of business review meetings to assess how the relationship is going, check in on the billing process, and clarify upcoming work.

Billing Hygiene

Specify the legal invoice formats and submission schedules your finance team expects from outside counsel as part of your legal billing guidelines. This ensures outside counsel invoices can be reviewed and paid in a timely manner.

You should also discourage the practice of block billing, where multiple tasks are lumped together under a single time entry. Though common, this practice makes it difficult to understand exactly what a timekeeper worked on. If you know what they worked on, it’s easier to make sure you’re paying appropriately for the value of that time. Instead, insist on itemized billing for legal work. Then, rely on your AI-powered legal e-billing system to absorb and analyze all that information.

And don’t forget to implement a systematic approach to accruals. Your guidelines should require timely reporting of unbilled estimates from outside counsel. This ensures your financial statements are accurate so you have a complete picture of your legal spend.

Ask Your Network

Editable billing guideline templates, like this one created by Brightflag, can give you a headstart to creating or updating your own set. Beyond that, it’s up to you to decide how to tailor your legal billing guidelines for your company. You might edit some of the best practices provided in the template to fit your circumstances better.

It’s also important to consider things like branding and voice. Some companies with friendly branding—think tech companies—will write their guidelines in a friendly, casual tone. Others, like banks, adopt more formal language.

The best way to get a feel for what makes sense for your industry is to ask people in your network if you can see their guidelines. The peers you meet at legal ops conferences and online groups are a great resource. If you don’t have an extensive network, the legal ops community is always willing to help. Contact people through the Corporate Legal Operations Consortium (CLOC), the Association of Corporate Counsel (ACC), and LinkedIn.

Consider Enforcement

Billing guidelines are only as good as your processes to enforce them.

Without good processes to review each invoice line item for guideline violations and then easily remove those items, your guidelines are little more than a pretty document. Your attorneys don’t have time to do this manually. You need technology to assist you.

Modern legal e-billing solutions like Brightflag use AI to read and understand every line item and then check those items against your guidelines. Brightflag automatically flags issues for your review and deletes items with a click.

Roll Out The New Guidelines

Once you’ve drafted your new legal billing guidelines, it’s time to share them with your vendors. If you had guidelines in place previously, make sure to emphasize any major changes and also clearly communicate the reasons behind those changes.

Next, host internal training sessions so everyone within the legal department understands the guidelines.

Now that everybody is up to speed, it’s time to begin enforcement. Leverage your e-billing system to apply the guidelines and monitor compliance rates. If you see unusually high noncompliance, you should have strategic discussions about billing behavior with your firms or tweak some of the language in your guidelines. That’s OK! Remember, this is a living document. Adopt a regular cadence for reviewing and updating these guidelines to match industry shifts or company process changes.

Stay In Step With Legal Billing Guidelines From Brightflag

Refining your legal billing guidelines isn’t just about setting boundaries but effectively managing legal spend. For the corporate legal department, streamlined guidelines mean tighter cost control and more predictable budgeting. For outside counsel, clear expectations translate to smoother invoice processing and quicker payments.

You don’t have to start from scratch with legal billing guidelines to stay in step with your vendors. Download our sample guidelines and set the rhythm for your next dance.