The Most Common Financial Challenges Law Firms Face and How Leaders are Using Technology to Address Them

I spoke with Rick Hellers, the CEO of Scan Logic, the provider of BillSync and APSync, designed to simplify law firm finances. We discussed the most common financial challenges law firms face, how leaders are using technology to address them, best practices for ensuring prompt and full payment of legal invoices, and how the economy is affecting the financial health of law firms.

Episode Transcript

(00:01):
Welcome to Reinventing Professionals,a podcast hosted by industry analyst
Ari Kaplan, which shares ideas,guidance, and perspectives from market
leaders shaping the next generationof legal and professional services.
This is Ari Kaplan and I'm speaking todaywith Rick Hellers, the CEO of Scan Logic.

(00:22):
The provider of Bill Syn and AP syndesigned to simplify law firm finances.
Hi Rick, how are you?
Hey, ari I'm fantastic.
I'm really happy it's friday.
How about you?
I'm looking forward to this conversation.
Tell us about your role at ScanLogic and how it's evolved.
As with any startup the evolutionis fast, exciting, and sometimes

(00:47):
a bit of a rollercoaster.
We're almost two years into this,and we've experienced all those
things, but we've found our footing.
We know our market.
The market's responding to usincredibly well, and we're solving a
really tough and challenging problem.
What are the most common financialchallenges faced by law firms

(01:08):
and how are law firm leadersusing technology to address them?
Law firms are usingtechnology like never before.
I think back to some of the earlier daysin my career, and I remember that the big
challenge back in the nineties was justgetting lawyers to embrace technology.
Now it's more in terms of what workflows,what tools can be helpful for the

(01:31):
practice and the business of law.
We're focused on the business of law,which is pretty important , and as
firms have gotten bigger and as theworld has moved rapidly , there's a
real emphasis these days on invoice tocash and collecting money, making sure
that lawyers get paid and we're helpinglawyers get paid, specifically for E-Bill,

(01:57):
what are the best practices lawfirms should use to ensure rapid
and full payment of their invoices?
First and foremost, compliancewith outside counsel guidelines.
I began as a young bookkeeper in 1979 withthe law firm, and back in those days, the
relationship was formalized by handshake.

(02:18):
The relationship between the partnerand the client was out of respect.
Bills were sent, they were generally paid.
There weren't a lot of questions, but overtime we've seen that change dramatically.
We moved from a handshake to feeagreements, and now really what
is controlling the relationshipare outside counsel guidelines.

(02:38):
That, in some cases can be a hundredor more pages long and dictate every
term and condition by which the firmhas to operate in order to get paid
and it's cumbersome, it's tedious.
In some cases, it's almost impossibleto comply, particularly if you're
doing it in a manual fashion.

(02:59):
How are outside counsel guidelinesaffecting the way law firms
are adapting their billing?
I had one lawyer tell me that hespends more time lawyering his
bills than he does practicing law.
And that's obviously not a good thing.
It's creating frictionin the relationship.
It's creating frustrationfor the law firms.
The generation of bills has becomemore complex than ever before.

(03:23):
I had a billing specialist in a biglaw firm describe the e-billing problem
as playing three dimensional chestand whack-a-mole at the same time.
Just the thought process and the meansof which you have to solve a problem and
present the bill in the correct way hasjust become overwhelmingly complex that

(03:47):
in some cases it's impossible to comply.
What's the solution?
Automation technology, ai it's a matter oftaking these outside council guidelines,
reducing them to rules, and then applyingthose rules against hundreds of thousands
of time and cost entries to ensure thatthe time that the lawyers spent on the

(04:12):
case are accurately described and complyagainst the outside council guidelines.
One example that I like togive is that block billing
has been a problem for years.
If you combine multiple tasks in asingle entry, it's gonna get rejected.
If you travel, it's going to requireyou to indicate where you traveled to,

(04:34):
where you traveled from, what methodof travel you used and how far it was.
If those elements aren'tincluded in the bill, you're not
gonna get paid for that entry.
I saw an outside counsel guideline acouple of weeks ago that said, if you
use AI on our case, you need to tellus you use ai, you need to tell us

(04:55):
how we benefited from it , and youneed to describe and justify why you
did that in the time entry itself.
This evolution of the client dictatingwhat they'll pay for based upon
how you bill is becoming extremelyproblematic for firms to deal with.

(05:18):
How is artificial intelligence affectingthe way law firms address invoicing?
From our standpoint, if you'regonna ensure that every single
time and cost entry that you billcomplies with the outside counsel
guideline , you have to use acomputer to proof it, to generate it.
You've gotta use AI just because of thesheer volume of what firms are billing.

(05:41):
A bill for $10,000 may consist of ahundred different entries from five or six
different people that have worked on thecase , so you've gotta scrub those entries
against the outside counsel guidelinesto ensure that they'll be accepted,
validated and ultimately paid for.
Without that, firms are faced withjust throwing people at the problem to

(06:05):
review the entries, to review the bill.
If you throw people at it,number one, that's costly.
Two is I had one firm tell me thatthey hired a new E-billing specialist
and they estimate that it's gonnatake 'em a year to get that person
up to speed and knowledgeablebefore they can be productive.
That's how specialized the skillshave become in this marketplace.

(06:28):
How is the current economy affectingthe financial health of law firms?
Firms are continuing to raise rates,but to some extent they're raising
the rates and not necessarilyachieving the realization from it.
You send out a bill for $10,000 andthe e-billing gateways review that

(06:50):
bill and knock off one 10th of an hourhere and one 10th an hour there as
excessive time or didn't provide theright level of documentation or the
outside counsel guidelines said youcan't have more than one attorney at
a deposition without prior approval.
The firm sent two attorneys,didn't get prior approval.

(07:11):
They're only getting paid for one of 'em.
How do you see this area ofe-billing, invoicing, evolving?
Continuing to get complicated, continuingto get extreme scrutiny and review.
We're also moving to an element whereinstead of a firm simply billing for

(07:32):
something, the client's gonna tellthem, they're willing to pay for that
deposition, as opposed to the firm simplysaying we're representing you and putting
our expertise in play, and you shouldpay for us because we're making the
decision of what it takes to service you.
It's really flip flopped.
It's a buyer's market.

(07:53):
The consumers of legal servicesare in a great position to pick and
choose who they hire to dictate theterms and conditions of what they'll
pay for, what they won't pay for.
And law firms have historicallybeen slow to adapt.
Hearing that a client is goingto decide what they'll pay for.
Most firms just haven't reallyaccepted that's a common

(08:14):
way of doing business today.
This is Ari Kaplan speaking withRick Heller as the CEO of Scan Logic,
the provider of Bill Syn and AP syndesigned to simplify law firm finances.
Rick, a privilege.
Great to see you.
Thank you so much.
Great to see you.
Have a great weekend.
Thank you for listening to theReinventing Professionals Podcast.

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Visit reinventing professionals.com orari kaplan advisors.com to learn more.