Part 1: The Hidden Costs of Manual Invoice Review

Executive Summary Manual legal invoice review is weighed down by a mix of internal challenges. Reviewers may lack the specialized legal expertise to assess line items and the time to conduct thorough analysis at scale. This can be compounded by inaccessible OCBGs and fragmented data in disconnected systems. The pressure to maintain positive relationships with outside counsel can also undermine enforcement. These challenges create a porous and subjective process that leads to significant non-compliant spend.

This is Part 1 of our five-part series “Stop the Leak: A Guide to Mastering Legal Spend.”

Manual legal invoice review comes with more than just time and effort—it carries hidden costs that add up quickly. Reviews can take hours, often produce inconsistent results, and allow non-compliant charges to slip through. For some organizations, this non-compliant spend represents as much as 6–12% of annual legal fees.

Billing guidelines lay out the rules for what Outside Counsel can and cannot bill, providing essential reference points for invoice reviewers. Yet, according to Bloomberg, while 72% of in-house teams track legal spend, only 18% measure adherence to billing guidelines. In other words, most companies are monitoring legal spend but less than one in five check whether vendors are billing correctly.

The situation reflects a process breakdown, driven by internal challenges and vendor behaviors. In this article, we’ll unpack the hidden costs of manual invoice review and explore what Legal Ops teams can do to improve outcomes.

Internal Challenges

The difficulties often stem from a set of internal challenges, common across most teams, even within mature operations.

Knowledge Gaps

In-house attorneys may conduct a primary invoice review, but rarely run a full, line-by-line compliance check. That task usually falls to ops or financial reviewers, who check allowability, rates/caps, and timing using billing guidelines and sometimes with the help of automated system rules. These reviewers may not always understand the work being billed, which presents a knowledge gap, and one significant barrier to effective invoice reviews. Legal work assessment requires legal judgment that often these reviewers do not possess.

Consider these common invoice review decisions:

• Was four hours of legal research reasonable for this motion?
• Should a securities filing have required partner-level review?
• Was it necessary for three attorneys to attend this negotiation?

These questions require both understanding of the legal domain and the strategic significance of the work being done. Yet the individuals that often do invoice reviews can lack the specialized knowledge to make these calls.

Even experienced in-house counsel may struggle outside of their expertise. For example, how does an employment lawyer assess IP litigation or whether a regulatory filing required six lawyers?

Time Pressures

Some organizations may process tens or even hundreds of thousands of invoices every year. Complex matters with many detailed invoices require significant time, but most teams rarely have adequate resources for comprehensive analysis.

A single M&A transaction might involve six to eight law firms across multiple jurisdictions, each submitting monthly invoices with hundreds of time entries from dozens of professionals. A complex litigation matter can produce 50-100 pages of billing detail monthly from multiple firms.

Many Legal Ops teams lack the time and effort to check this level of billing detail, mapping each entry against budgets, and evaluating the appropriateness of each line item against outside counsel billing guidelines (OCBGs).

Inaccessible OCBGs

Bloomberg found that only 18% of companies measure or collect compliance with billing guidelines. The study suggests that most reviewers either do not have, or cannot easily access, these guidelines or cannot interpret them.

Many organizations have OCBGs buried in:

• Master service agreements
• Email chains with original retainer negotiations
• Ad hoc agreements scattered across multiple systems

For reviewers to enforce OCBGs, they need centralized, accessible guidelines.

Data Fragmentation

Legal spend data typically exists across disconnected systems:

• E-billing platforms with invoice details but lack matter context
• Contract management systems that hold retainer agreements but don’t connect to actual billing
• Matter management platforms that track case progress but don’t integrate with spend data
• Financial systems that record payment information but do not connect back to the e-billing platform

As a result, reviewers could have individual invoices but lack the broader context of budgets, scope agreements, and historical billing patterns needed for effective invoice reviews.

Human Factors

Invoice reviews are not merely about billing. They’re also about the vendor relationships. Unlike other vendors, relationships with law firms infer sensitivities that could clutter decisions on whether to approve or reject charges.

Legal ops managers often report feeling caught between a rock and hard place: Control costs or potentially damage relationships with key firms. This dynamic is particularly acute with:

• Prestigious firms representing the company for decades
• Relationships involving former colleagues or industry connections
• Matters requiring specialized expertise where alternatives are limited
• High-stakes litigation where attorney motivation affects outcomes

Relationship pressures can lead to less aggressive audits or simple hesitation. For example, how do you tell the firm handling a highly specialized matter that, if they do not submit their invoice soon, they can expect a “haircut” of 30%?

Then there are the reviewers themselves – each with discrete ideas about what constitutes “reasonable” legal work. Different reviewers may reach different conclusions about identical entries, creating subjective enforcement that undermines the entire compliance framework.

Without clear, objective standards and uniform enforcement, manual review can become arbitrary, and vendors might begin to leverage these inconsistencies, even if unintentionally, to their advantage.

When reviewers face unknowns and indecision, they benefit from precise escalation paths. However, too often, this path leads to subjectivity. The decision to approve or reject gets kicked-up to someone qualified to make a call – what becomes a black-box decision with no visibility or appreciation of why.

While this demonstrates the opposite of a “learning system”, most organizations also lack:

• Escalation triggers for repeated violations
• Pattern recognition across multiple invoices
• Systematic feedback to vendors about compliance issues
• Data aggregation to identify firm-wide billing trends

These challenges further perpetuate a system where institutional knowledge can be difficult to build, undermining confidence in invoice reviews.

Vendor Challenges

Vendor practices, whether intentional or not, can complicate reviews.

Block Billing

Block billing bundles tasks into single time entries, making assessment nearly impossible, especially within tight review timeframes:

This practice forces reviewers to either approve the entire block or delay the process by requesting breakdowns, often weeks after work was performed when context is lost.

This practice is frowned upon, with one federal judge in the U.S. Bankruptcy Court referring to it as “a plague that judges should not tolerate”. To confront block billing, some organizations impose automatic discounting. The US Courts are one such organization, known to reduce legal fees by 10-30% when encountering block billing, according to research from Taylor & Francis Group LLC. If the US Courts, with their legal expertise struggle with block billing, then most other organizations will struggle as well.

Vague Descriptions

Generic descriptions make it very difficult to assess compliance:

• “Legal research” (4.0 hours – $2,000)
• “Review documents” (2.5 hours – $1,250)
• “Telephone conference regarding matter” (0.3 hours – $150)

The practice of vague descriptions force reviewers to accept charges blindly or invest significant time requesting clarification.

Admin Work at Attorney Rates

Partners billing $800+ per hour for paralegal-level work is a compliance violation, butidentifying these issues requires detailed analysis that manual reviewers rarely have time to perform. Barring an exceptional and painstaking review, these violations are often undetected, hiding within a complex invoice, yet contributing significantly to non-compliant spend totals.

Delayed Invoicing

When invoices arrive 60-120 days after work completion, organizations lose meaningful forecast ability and budget control.  

In response, some organizations have adopted aggressive countermeasures. The FDIC requires monthly invoices within 60 days and a final invoice within 90 days, with payment on late invoices “significantly delayed”. Similarly, one multi-billion-dollar social media platform automatically discounts late invoices and refuses payment entirely for submissions exceeding 90 days.

Overstaffing

Too often invoices reflect multiple attorneys billing for identical work. Instead of one, there are three lawyers attending the status meeting. Despite many OCBGs codifying staffing limits, it can be difficult to identify duplicate charges during manual reviews. A single client conference call might generate separate time entries from partners, associates, and junior attorneys for essentially identical work. Reviewers struggle to identify non-compliance when the task is legit, but the duplication is not.

An Action Plan for Improvement

The good news is that organizations can take action. They can address these challenges with a multi-pronged approach of process improvements, technology adoption, and refined vendor management strategies:

Organizations adopting these measures can significantly improve invoice reviews.

The Gist of It

The hidden costs of manual legal invoice review stem from structural challenges like limited expertise, time constraints, inaccessible guidelines, fragmented data, and relationship pressures. These gaps are compounded by common vendor behaviors like block billing and delayed invoicing. With only 18% of organizations actively monitoring compliance despite 72% tracking spend, the solution is a holistic platform that centralizes guidelines, unifies data, and leverage AI-powered review.

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In Part 2: We examine Outside Counsel Billing Guidelines (OCBGs)—the foundation of billing compliance—and explore why missing, outdated, or inaccessible guidelines make even the best review processes ineffective.