AR Innovation Tackles The Gray Area In Legal Services Invoicing

SimpleLegal Taps AI To Find Billing Errors For Legal Departments

There is a challenge in the B2B services sector that can wreak havoc on accounts receivable efficiency. Unlike other verticals in which tangible products are delivered, services can be more difficult to quantify, with plenty of room for billing gray areas.

Of course, billing and payment disputes can occur in the trade for tangible goods and products. But when it comes to services, pricing strategies can vary greatly. In the legal services arena, that invoicing challenge can become even more complex thanks to compliance requirements.

Discussing this hurdle with PYMNTS, Frontline Managed Services Senior Vice President and General Manager of Financial Managed Services Mike Ferdman and Vice President of Financial Services Suzanne Zimmerman said there may be a particularly large incentive for the corporate legal services industry to embrace a digital transformation in invoicing and B2B payments to help create a clear black-and-white transaction between a legal services provider and a business client.

Invoicing Gray Areas

Billing for services provided is typically standardized by charging a rate per service and per hour. But when it comes to providing a corporate client legal services, there are plenty of areas up for debate.

Invoicing for legal services, regardless of whether it’s electronically billed or more traditionally billed with invoice and statements mailed, it’s a complex process,” said Ferdman.

He pointed to factors that can affect how invoice data is presented and how services are charged — that can leave room for plenty of disputes. For instance, each corporate client might have different individuals with varying levels of responsibility for paying an invoice, so billers must be sure it gets into the correct hands.

There might be previously agreed-upon discounts and rates that must be accurately reflected on the invoice to ensure that contractual agreements are upheld.

“A lot of companies have client billing guidelines that lay out what they’ll pay for—and what they won’t,” noted Zimmerman. “Making sure that bills are in compliance with those guidelines to get them through the system is a challenge.”

There may be disagreements over what portion of a bill gets paid, or how much—for instance, a corporate client may only pay 50 percent of travel expenses incurred by a legal service provider.

It’s also not uncommon for recipients to request the method of invoice, with some requiring that it be sent via a particular digital portal or mailed via the post.

Making matters even more complex, various courts may have to participate if there are escrow or trust fund accounts involved.

“Knowing the process and all of the guidelines that have to be met in order to receive full repayment is quite an undertaking,” noted Ferdman. Ferdman added, “All of these situations can lead to someone needing to reach out and figure out one of these obstacles or roadblocks.”

Electronic Payments Progress

Once any disputes are resolved, then comes, of course, the challenge of actually accepting payment.

Despite its drawbacks, paper check sent via the mail remains a popular B2B payment method of choice in this arena. Legal service providers are not lost on the challenges of this, which have been exacerbated by a sluggish postal service. Ferdman recounted one instance of a client that was told “the check’s in the mail” last December, but that payment didn’t arrive until January.

There is gradual change afoot, however.

“The tide is turning very rapidly,” Ferdman said of the industry’s growing interest of ACH and wire transfer B2B payments.

Initially, he said, the legal services space saw a push towards lockbox services to help digitize check payment acceptance. As more firms press for automation and efficiency — especially as they make similar efforts in their invoicing practices — electronic payments acceptance is having a greater impact on overall accounts receivable modernization.

Today, only a few firms are comfortable with concepts like online bill pay. In addition to the costs of electronic payment acceptance, there are immense implications on keeping client data, including payment information, secure.

“This is an industry that will be slower to adopt” electronic payments, Ferdman said. “I think in the next year or two, you’re going to see a migration towards electronic payments.”