Tuesday, 13th March 2012 by Rosie Scammell

With in-house counsel ever more focused on efficiency, any tool that can help them spot where money is being wasted seems to be good news – but are Latin American law firms ready for e-billing? By Rosie Scammell

“It simplifies our life tremendously,” says Andres Cedron, who, as assistant counsel at technology company Stryker, has been implementing an e-billing system. “The legal department wanted the US [arm of Stryker] to simplify the process of billing and be able to track costs. Firms in the US are the easiest institutions to use the system, because they have the technology and a lot of their clients are already using them,” he explains. The department interviewed a number of e-billing companies and settled with Serengeti, a system used by the largest US firms.

But Cedron is aware that if the switch is to succeed, it will be a slow one. In Latin America, he is asking the international firms with offices in the region to switch to an e-billing system first, before moving to the largest local firms. “We know that it’s not going to happen from one day to the next,” he says, “it’s a long and winding road, but we just have to keep moving in the right direction. We’re doing something good for these firms because they’re going to be able to compete with the international firms.”

Law firms are not, however, the only reason for a gradual change to the new system: “Locally, we have processes in place that may not be able to cope with it; Stryker’s local offices need to get up to speed. We have six local offices and some came around later on, so the strength of their operations varies from an IT perspective.”

One of the immediate benefits of e-billing to general counsel is the ability to go paperless – especially attractive to the GCs of small teams, who can be freed from living underneath a mountain of paper and from having to be responsible for the sometimes hundreds of invoices issued by law firms. Not only does that represent a significant time saving, but equally, being able to promise your firms that bills will be dealt with efficiently from your end strengthens your hand significantly when it comes to negotiating rates.

However, long term, the real benefit of e-billing comes from the ability of the legal team to track their spending – by firm, practice area or deal, for example. If you suspect that one law firm is inflating bills, access to cold, hard, comparative data can help you decide if you are getting the most effective service, for example. It is then easier to see where unnecessary spending occurs, or where the legal team could benefit from greater support in-house; the system manufacturers claim they can cut 15 per cent from your budget, and even more independent research has suggested between 8 and 10 per cent. For a cost that averages at about half to 1 per cent of annual budget, the manufacturers claim this is a no brainer.

At Stryker, implementing the new system has also improved the department’s standing in the business: “The finance team love it because it makes their job easier. The commercial side wants to know how much we’re spending and saving on legal, and the system is able to tell them immediately. They don’t necessarily have to come to me; they can go to an admin person who has access.”

Stryker is at the early stages; just two of the international firms working with the company in Latin America have taken the system on, and Cedron is cautious not to alienate other firms. “I’m fully confident that they’re going to be receptive to our needs, but we need to be conscious of the fact that they and we need a transition period,” he says. Having joined Stryker directly from Hunton & Williams LLP, Cedron benefits from understanding both sides of the bills.

Productivity control

However, most general counsel operating in Latin America dismiss the idea immediately, saying that the law firms there are simply not ready for the idea, financially, technologically, or ideologically. And largely, particularly in the small jurisdictions, they are right; but, some of the biggest Brazilian firms have already implemented the process, implying that there, at least, e-billing could snowball over coming years. One such firm is Siqueira Castro Advogados, which has been using e-billing for over seven years. While changes to clients’ systems were a factor, the move came largely from a desire to have greater control as the firm grew. “With a growing number of people and clients – and invoices – we did not have a very strict form of control, and could go bankrupt if the system is not well administered,” explains partner Carlos Fernando Siqueira Castro.

“E-billing was a way of getting more control over the productivity of our lawyers, and having more transparency to our invoices. It was about getting more speed and recovery of expenses,” he adds.

Siqueira Castro uses Sisjuris, a Brazilian integrated system that allows firms to manage their entire system, from HR to a library, in one place. This helps the partnership when deciding whether to invest in a specific venture or not. Siqueira Castro’s 18 offices across Brazil are all integrated in this platform, suggesting few barriers for firms switching to e-billing with offices throughout Latin America.

Although Siqueira Castro has jumped ahead of many of its rivals in implementing an online system, the overall trend suggests that other firms will soon be pushed to follow suit.

“Large [corporate] players of the market are up to date with the top-notch technology,” Siqueira Castro says, suggesting that if clients are investing in IT, so too must the firms. “In the last 10 years the budget in IT has increased dramatically in every major law firm. The tendency is for these investments to grow. This is a reflection of a change in culture, not only in the legal market but the market in general.”

While an e-billing system does not necessarily help win clients, not having one does put firms at a disadvantage, according to Carlos Fernando Siqueira Castro. “If you do not offer the best services, your competitors certainly will,” he says. “When GCs decide on a firm, they take into account the firm as a whole – lawyers, offices and IT solutions. Ten years ago, a presentation to a client would be almost 100 per cent technical, based on the team’s experience; but today, all those other components are important.”

Another Brazilian firm using e-billing is Pinheiro Neto Advogados, while Machado, Meyer, Sendacz e Opice Advogados has plans to roll out a system next year. At present, a host of Machado Meyer clients – including Goldman Sachs, Inter-American Development Bank and Chevron – use e-billing, and ask the firm to reissue the invoices manually and register them in their system. As the law firm’s finance director, Clemente Vasconcellos, points out, this complex method means mistakes may occur that would not happen if the firm was on an e-billing system: “Since the data is sent electronically in a default model [with e-billing], there is a minor chance of reporting incorrect information, and the format can be totally organised according to the clients’ standards.”

Vasconcellos says that shifting to e-billing is “unavoidable” as it becomes the norm in the corporate sphere, adding that “internal cultural changes” will be a necessary part of the move.

A Mexican milestone

In some jurisdictions, regulation itself is pushing the e-billing agenda. Over a year ago it became compulsory for all companies in Mexico with revenues of over 4 million pesos (approximately US$310,000) to issue e-bills for the benefit of the tax authorities.

As a result, the Mexican market offers a range of systems that do not require a large pay-out at initial set-up. White & Case SC set up their system with MYSuite a few weeks before the 1 January 2011 deadline and pays for batches of invoices as they are needed. The cost savings are visible within a year, says White & Case administrator Érica Álvarez: “Costs have been decreased because we don’t have to pay for the printing of the invoice; it’s not a big investment as paper is almost as expensive. We also don’t have to pay for courier services, and it’s very easy to cancel invoices.”

Álvarez points out that the cycle of the accounts is also shorter, benefitting clients and firms as the invoice arrives instantly rather than waiting on cross-border postal services.

One challenge has come from Mexico’s large financial institutions, which demand invoices to specific design requirements. These are, however, manageable under White & Case’s system, and Álvarez advocates using e-billing across the region. She has just one piece of advice for firms new to the concept – to check whether the system is certified by the country’s tax authority. While firms and corporations in Mexico are bound by regulation, it is also important for those across Latin America to scrutinise their suppliers.

Advice and alternatives

Despite the success of Siqueira Castro’s e-billing programme, Carlos Fernando Siqueira Castro says implementing an entirely new system is not necessary for every firm or corporation. “Sometimes it is better to improve your current system and customise it than to make a more radical change to another system, which costs millions of dollars,” he says.

His air of caution comes from dealing with a couple of clients whose transitions proved “catastrophic”. “One client lost access to their database of law suits for almost three months. It was a client that had many thousands of law suits all over Brazil; we had double copies of almost everything they had so they were able to continue operating. But you have to be sure that you have all the contingency plans well-established.”

Ensuring compatibility of systems between corporations and firms is also important, although clients can delegate this concern in part to law firms; Carlos Fernando Siqueira Castro says that, in his experience, “the only certainty is that there is a solution” when the firm’s Sisjuris system does not match their client’s.

Pam Woldow, consultant at Edge International, has advised in-house departments on the systems available, and says “there are products for every price range and robustness”. A small team with a low spend will not necessarily need a whole suite of e-billing products, although she has seen a rise in the number of mid-tier companies implementing systems. Following a global spike last year, Woldow is sure the rise in usage will continue throughout 2012.

The in-house teams and firms that have tapped into the e-billing market are quickly seeing the benefits, with an open-minded approach to Latin America. At Stryker, Cedron is clear that his task of rolling out e-billing will take over a year, but is confident of the benefits it will bring: “Law is a profession that is very resistant to change. It happened with e-mail and computers in general, and I think it’s going to happen with e-billing. This has the potential to bring about positive change.”

(Latin Lawyer 13.03.2012)

(Notícia na Íntegra)