06 December 2019

US firms write off up to fifth of fees due to 'overwhelming' billing demands

Survey of nearly 200 law firms calculates that outside counsel guidelines are costing some firms $4m a year

US law firms are writing off up to 20% of their fees as they struggle to comply with their clients’ onerous billing requirements, a survey of nearly 200 law firms has found. According to the inaugural Law Firm Leader Survey on Outside Counsel Guidelines (OCG), some law firms are losing $15,000 a day - or nearly $4m a year – thanks to their ongoing struggle to comply with their clients’ demands.

Conflicts management

OCG are used by legal departments to monitor and standardise various aspects of the client lawyer relationship, including conflicts management, status reporting, cybersecurity measures and billing procedures.

However, only 11% of the respondents said they felt the guidelines had improved client communications, according to the survey, which was conducted by the Association of Legal Administrators (ALA) and compliance tech specialists Bellefield Systems. 

‘Law firm views of OCG worsen from here,’ the report states. 'Almost half report that OCG have actually made it more difficult to communicate with clients (40.25%), even more report that they believe clients change the rules and guidelines without informing the firm (46.54%), and the majority of firms (63.52%) have pushed back on guidelines.’

Headache

The report identifies billing compliance as the most pressing headache for law firms, which it describes as ‘so complex and overwhelming that, rather than solving the challenge, it is cast aside as a cost of doing business and firms simply accept the cycle of appeals, payment delays, fee reductions and write-offs’.

Asked how the relationship between clients and their firms could be improved, 60% of the respondents said they needed more visibility into what legal departments want while 46% said better technology was the key. The third-most popular mechanism for an improved relationship was for legal departments to be more open about their OCG.

Challenge

ALA chief executive Oliver Yandle said: "Compliance with OCG has been a significant challenge for law firms for some time now, and the survey results bear this out.”

Twenty per cent of the Am Law 200 law firms participated in the survey, while firm administrator, billing manager and office administrator were among the most common roles of the respondents.