Increase legal spend savings with invoice validation

Mary Beth Soliwoda | August 3, 2022 | Articles

In the 20 years I have spent in the enterprise legal management industry working with a variety of differing e-billing and matter management solutions, I have found few things that made more sense to me over the years than implementing invoice validation rules with your e-billing solution.

In my experience, companies who have implemented invoice validation rules and are enforcing them consistently see average first year savings between 3% and 5%. Some see even higher returns – as much as 7% to 10%!

I have become quite passionate about invoice validation rules and highly recommend their use, especially when legal teams are looking for opportunities to reduce legal spend, drive conformity and consistency in billing practices, and enforce billing requirements. Their use is one of the fastest ways to see results in these areas.

How does invoice validation benefit your legal team?

Invoice validation rules check the e-invoices as they are submitted by your Legal Service Providers (LSPs) to validate they conform to your outside counsel guidelines (OCGs) or standard billing requirements. They’ll catch disallowed charges, late billing, or incorrect billing practices before they even arrive in a reviewer’s invoice queue.

How do validation rules do all that? Rules can be configured to require certain “consistent” components such as the use of UTBMS codes, timekeepers and line-item descriptions. They can even take action on invoices or line items that do not comply with your outside counsel guidelines, such as copy charges. The use of invoice validation rules also drives certain behaviors in your outside counsel:

  • Consistency in billing practices
  • Reducing rejections
  • Speedier billing cycle time by reducing both biller and reviewer time
  • Faster payments to your LSPs

How to get started with invoice validation

Consistency, transparency, faster invoice review cycles and cost reductions are all great benefits, but how do you start? Here’s how I’ve seen your legal peers successfully implement invoice validation.

1. Know your goals

First, you need to know what you want to achieve with the use of invoice validations. Is it reducing spend, faster review cycle times – or both? Or are you looking to enforce certain alternative fee arrangements, such as vendor discounts? Knowing your end goals will help you decide which types of validations to concentrate on.

Sounds simple, and in many ways it is….but there are a few things to keep in mind as you decide which validations you wish to put in place. It’s entirely okay to start small, then add. If you don’t already have OCGs, start with some industry standards. SimpleLegal has ~20 standard rules we suggest as a starting point for these situations.

Remember, even if you don’t have everything decided but know you would like to start using invoice validation, that is okay – even just a few rules can make impactful changes. Depending on the rules you put in place once you start, you should begin to see reduced costs, better consistency in billing practices, and faster cycle times.

2. Know what actions to automate

If you’re stuck on where to begin, look for areas of known opportunity. If you’ve noticed a trend of LSPs consistently billing for something you disallow or limit reimbursement for, such as copy charges, this is a great place to include a rule or two.

The next step is deciding what type of rules to include. Should your rules flag the offending invoices or line-items? Or should they take a more direct action such as auto-reducing or auto-rejecting?

In my experience, the recommended approach is to reduce or reject charges that are too high or disallowed where you can, like when a UTBMS code triggers the validation rule. When the reviewer needs to pay closer attention to the charge like when prior authorization is needed for certain work, my recommendation is to flag. These rules complement each other. Reducing or rejecting line-items takes the work off the reviewers, saving them time to pay closer attention to flagged line items, or even other work they perform.

But remember there are always exceptions! Taxed invoices should not be altered, so flags work best for these types of invoices, even if they may not follow the recommendations above. Use your best judgment for the invoices that don’t fit.

Other things to consider include being as concrete with your rules as possible and keeping them relatively simple and straightforward rather than overcomplicating them. Just because you can create a validation rule doesn’t mean you should. For example, too many keyword rules can cause an entire invoice to be flagged. This can lead to “flag fatigue” in your reviewers and cause them to ignore the flags altogether, completely defeating the purpose of invoice validation.

3. Determine how to measure success

Monitoring invoice flagging and what actions the reviewers take on flagged items are a good place to start. Monitoring system actions such as automatic adjustments and the amounts invoices are reduced are also good to track.

Develop reports that capture the amounts flagged by the invoice rules, the actions taken, and the amounts automatically adjusted or rejected. Comparing validated invoices with pre-validated invoices will show automatic savings, reviewer-driven savings, and what your overall cost reductions are. You’ll even be able to see which reviewers are taking appropriate actions and which vendors are most or least compliant with your billing instructions.

4. Communicate and build a change management plan

If this is the first time you’re using any kind of validation in your e-billing system, you’ll need to get both your LSPs and your internal reviewers on board. And to do that, having a plan to communicate that change is key.

When communicating your intent to add invoice validation to your e-Billing process, give your vendors plenty of advance notice. I’ve found that 30 to 60 days in advance of turning validations on with a minimum of 2 outreaches is most successful. The first communication should be informational, letting your vendors know of your intent to enforce your company’s OCGs / billing requirements along with the timeline. The second is a reminder of the upcoming change.

At the same time, prepare the invoice reviewers within your organization on the changes coming. Provide appropriate training and documentation on the differences they will see once the validation rules are turned on, how to identify invoices or rules that violate your OCGs / billing requirements, and most importantly, how to take action on those violations.

Emphasize that reviewers need to be consistent with the actions they take when reviewing invoices and encountering flags. If the flag is showcasing a true violation, adjust as appropriate every time, not just sometimes. This will drive your LSPs to more accurate compliance with your OCGs, which will also speed up review cycles as your firms practice better billing practices faster.

Build reviewing your validation rules on a periodic basis into your change management plan. At a minimum you should review the rules whenever you update your OCGs or standard billing requirements. As you are monitoring the rules you put in place, you may find opportunities to add or modify if something in your billing requirements has changed.

5. Time to implement

If you’ve followed all the steps above, you’ve ensured a successful implementation process. While we can’t promise the journey will be completely smooth, doing the bulk of the work above will assist you with any bumps on the way.

Align your OCGs or standard billing requirements to the validations available in your e-billing system. Then configure the validation rules and communicate a “Go-Live” date to your team and vendors. You are now ready to turn your rules on!

Save time and money with invoice validation rules

Using invoice validation rules is one of the fastest ways to see direct cost savings when implemented thoughtfully. Their use is designed to save reviewers’ time by taking some of the manual work of reviewing off their plates. And it’s easy to course correct – if a rule isn’t working the way you need or intended, it can easily be turned off.

So if you are looking for any of the benefits implementing invoice validation rules will bring such as cost reductions, consistency in billing practices, saving time for LSPs as well as your reviewers, and shorter invoice cycle times, consider implementing an invoice validation strategy to your e-billing system!

For SimpleLegal customers interested in learning more about invoice validation, reach out to your Customer Success Manager for more information.

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