Too important to ignore, too tedious to tolerate. That’s the tension most in-house legal teams feel when it comes to invoice review.
And considering all it traditionally takes just to get the task done each month, there’s rarely any time or energy remaining to think about how to get it done better.
So we did some thinking of our own and came up with a sustainable legal invoice review strategy that’s surprisingly simple to apply.
You can just call it the Four-Bucket Strategy for short.
Bucket 1: Hard Violations
Contents
Invoices containing clear and obvious violations, such as unauthorized expenses or budget overruns.
Example
Invoice includes numerous administrative services that were explicitly prohibited in your legal billing guidelines.
Ideal Workflow
Even the easiest billing errors to identify still carry a time cost. And for legal departments always under pressure to generate more value from every hour, this is the first category of invoices to clear from the queue.
After all, why waste your time reading invoices that have no reasonable chance of being approved and forwarded to Finance in their current state?
The best thing to do is flag invoices fitting this description early and reject them before you ever begin a formal review. (If they qualify for Bucket 3 or Bucket 4 once resubmitted, then they’ll deserve a deeper look.)
Bucket 2: Clean Invoices
Contents
Invoices containing zero violations or questionable costs.
Example
Invoice violates zero billing guidelines, applies correct timekeeper rates, and honors all set budgets.
Ideal Workflow
A completely clean invoice is cause for celebration. It means the realities of your vendor’s billing practices are in perfect alignment with the expectations embedded in your budgets and guidelines.
But it could also be cause for regret. After reading through dozens of pages of completely clean invoices, you might have that nagging feeling that your time and effort had no impact at all.
Similar to Bucket 1, you’ll want to make the early diagnosis that these invoices are not worth reviewing. Except, in this case, Bucket 2 bills should be sent straight to Finance for timely reimbursement.
Bucket 3: Soft Violations, Larger Invoices
Contents
Invoices of greater length and cost, containing less obvious and less serious violations.
Example
Invoice includes excessive partner time and internal communication on four of 15 pages.
Ideal Workflow
Not all legal billing violations are created equal. Those that flagrantly break your most fundamental rules have a home in Bucket 1. But what about those that challenge, bend, or break your rules for potentially valid reasons?
Bucket 3 and Bucket 4 are designed to address that gray area. They host invoices that require a level of nuanced judgement that only an expert human reviewer can provide.
The time you save by employing Bucket 1 and Bucket 2 effectively can immediately be reinvested into the other two. But since time is still a limited resource, start with Bucket 3. With more legal spend at stake here, your diligence will have a disproportionately high chance of making a positive impact.
Bucket 4: Soft Violations, Smaller Invoices
Contents
Invoices of lesser length and cost, containing less obvious and less serious violations.
Example
A single-page invoice includes a line item that’s potentially misclassified as research.
Ideal Workflow
Shift your attention to reviewing invoices in Bucket 4 only after Bucket 3 is empty — but take note of the billing violations you encounter. Is there a common issue that seems to be causing confusion? Identifying and resolving misalignments here will not only benefit the other three buckets, but also your vendor relationships in general.
The Secret to Legal Invoice Review Strategy
The ideal workflows described above are all within reach when you have the right legal spend management software. Technology can act as an extension of your team, handling the decisions that don’t deserve your attention and clarifying the ones that do.
When your vendors submit invoices via a legal spend management system, the software immediately steps into the role of gatekeeper. It learns your legal billing guidelines and uses those rules to interrogate incoming invoices.
If the software spots hard violations, then it will escort the faulty invoice to Bucket 1 before it ever has a chance to distract your team.
If the software sees that an invoice is completely clean, then it will route the invoice to Bucket 2 where it can bypass your legal department and head straight to your accounts payable (AP) system for payment.
Finally, if the software suspects soft violations, only then will it send an invoice toward Bucket 3 or Bucket 4 so that you can take a closer look.
This upfront screening and sorting significantly accelerates legal invoice review for two reasons. First, it reduces the volume of invoices that end up in front of a human reviewer. And second, even when invoices do make it into Bucket 3 or Bucket 4, you won’t necessarily be reading each one from top to bottom. By bringing soft violations to the surface, the software tells you which sections to focus on first.
A Continuously Improving Legal Invoice Review Strategy
So how can you apply the Four-Bucket Strategy for maximum effect? The first priority is to push as many invoices into the first two buckets as possible.
You’ll achieve this by making your legal billing guidelines clear and comprehensive. Because both your vendors and your software need to know your explicit expectations around each billing scenario if the strategy is going to work. (If the proportion of Bucket 1 invoices is decreasing and the proportion of Bucket 2 invoices is increasing over time, you’ll know you’re making the right moves.)
The next priority is to accelerate your handling of Bucket 2 invoices. Automated routing rules will help clean invoices sprint from one reviewer to the next along your approval chain. But the most impactful innovation will be integration. By directly connecting legal spend management software with your finance team’s AP system, you can take days off your average turnaround time.
The final priority is to take advantage of every software feature that could enhance your review experience when managing Bucket 3 and Bucket 4. Have you enabled email notifications to alert reviewers exactly as soon as an invoice arrives? Are you attaching comments to the invoice to give colleagues extra context around confusing matters?
Focus your energy on those three areas and soon your legal invoice review strategy will look like this:
Invoice Volume (High to Low)
Bucket 2, Bucket 3, Bucket 4, Bucket 1
Review Time (High to Low)
Bucket 3, Bucket 4, Bucket 2, Bucket 1
And once that’s true, just think of the extra energy you’ll be able to apply to *Bucket 5.
(*All the things you originally planned to get done today!)
4 Minute Read