Understanding Billing Terminology in Actionstep

Modified on Mon, 24 Nov at 5:56 PM

In life, a spade is often called a spade, but it may also be called a shovel, a trowel, a digging implement, etc. The same can be said of billing terms within Actionstep—often there are multiple ways to refer to the same concept or function. Sometimes using these multiple terms can cause a lot of confusion. This article attempts to explain some common differences in the terminology used in Actionstep's billing workflow.

Fee Earner vs. Timekeeper vs. Author

These are common terms for the people who record time or fees to be billed to the client.

In Actionstep, the term timekeeper might be used when you're looking at a time or fee entry, particularly if you are looking at it outside of the context of a bill or invoice. Actionstep may also use the term Fee earner in reports that focus on the value of the total fees for a user on an invoice or bill, or in relation to a payment for an invoice or bill.

Bill / Invoice

The terms bill and invoice are used interchangeably in Actionstep. They represent the accounting transaction for services and costs that the firm has done for the client and that the client is liable to pay the firm. Specifically, bill is the term more commonly used in the U.S. while invoice is more commonly used outside of the U.S.

In Actionstep, you'll typically see these terms in the following places:

Actionstep includes a Create Bill and an Edit Draft Bill screen. However, the screen where you view the details of an approved bill/invoice is called Sales invoice XYZ.
It also has a global list view which shows all bills/invoices in the system called Bills list. However, on the matter, a list of all bills/invoices is called Bills (in the U.S.) and Invoices (in the UK / ANZ).

Time Entry / Time Record / Fee

Fees are the charges that a law firm will make for the services they provide. Mostly, fees are recorded as time (e.g., it took me 3 hours to do this at $150 per hour for a total of $450) but a user can also record a fee at a certain amount regardless of its time (such as a fixed fee).

In Actionstep, you'll typically see these terms in the following places:

The page for recording a time/fee entry is called Create Time Entry.
The Timesheet screen also calls it a time entry.
On the matter, if you want to see a list of all the time/fee entries, you view the Fees list view.

Disbursement / Expense

Disbursements / expenses are costs that the law firm has incurred on behalf of the client. The firm wants to charge them onto the client so they can recover those costs.

Expenses is the more common term in North America, while UK and ANZ users use the term disbursements.

In Actionstep, you'll typically see these terms in the following places:

Actionstep supports an alias to show different terminology depending on where the Actionstep system is based.
When creating a new disbursement or expense, in the U.S. the option is labeled Create expense. In the UK and ANZ, it is labeled Create Disbursement.
When viewing these transactions in a list, the list is called Expenses in the U.S. and Disbursements in the UK and ANZ.

Billable Items

Billable items are time/fees + disbursements/expenses.

Collectively, the fees and disbursements that a user records on a matter are called billable items. They are items that are recorded on the matter so that they can be added to a bill that will be presented to the client. Some time/fees can be entered as "non-billable," which means it will not be billed but normally, these aren't differentiated.

The term billable item typically isn't used in the Actionstep product, but it might appear in help articles.

Billing Status of Billable Items

In Actionstep, fee and disbursement records are assigned billing statuses to help users understand their context. They are non-billable, unbilled, billed, draft, and written off:

Non-billable can only apply to fee items. These are fee/time records that are recorded in the system but cannot be billed. The are used as a record of what was done but will not be charged to the client.
Unbilled are billable items that are recorded on the matter and will be billed to the client but have not been added to a bill yet.
Billed items are ones that have been added to an approved invoice (as opposed to a draft invoice). Billed items are locked and cannot be changed.
Draft items are similar to billed items but they have been added to a draft invoice. They can be edited from the draft bill but not from outside the draft bill (e.g. opening a draft fee record from the timesheet will not let you change it's value).
Written off billable items are ones that were unbilled previously but have been written off. Firms do this when they decide that they will not bill the items and want to record the loss of potential revenue that choosing not to bill the item causes the firm. A written-off item cannot be billed.

Bill Behavior

Bill behavior is a setting you can apply to fee/time records that will control how that item appears in the bill. There are three bill behaviors that can be applied:

Bill is used for most time entries. When you add a fee record to a bill that has the Bill behavior, it will appear on the bill and add to the total fees on the bill.
Hide is used when you want to have the time record be marked as billed but to not actually appear on the bill when the client views it and to not add towards the total of the bill. Use this when you want to capture the value of time that the fee earner has contributed to the bill/invoice even if it does not add to the total (fee allocation can be calculated based on the value that a time adds to the total fees or by its value even if it has the bill behavior Hide or No charge.
No charge is used when you still want to show the time record on the invoice/bill but you do not want to charge the client for it. This is often used to give a clear record of what was done for the client even if you do not want to charge for it.

Hidden Time vs. Non-billable Time vs. Written-off Time

These three states might seem similar but will have subtle differences, particularly when it comes to how you report.

First, non-billable time does not have any recorded value. There are no rates applied to the time spent, it is just a record of the time spent. For reporting, you can see how many hours a user has recorded on non-billable items but calculating the value of that time is hard.

Instead, it may be better to record the time as billable, with a value but mark it’s bill behavior as Hide. A fee/time record set to Hide will not have any billable value (i.e., when you bill it, it will not appear in the bill and will add to the total fees of the bill) but you can still see what its value would be, given the rates and defaults that were in place when it was created. Actionstep reporting can highlight potential "losses" to the firm by not billing the value of the time. By marking it as Hide rather than marking it as non-billable, you can report on that value more clearly.

Written-off time is intended to capture time that will not be billed. Normally, this happens because the matter is ready to be closed and you don’t want to bill the remaining unbilled time. Actionstep does not let you write off time during the billing process so that you can differentiate between time that is marked as Hide and time that is written off. Reporting on time that has the bill behavior of Hide should highlight where the firm chose to remove the value of that fee/time from the bill. Reporting on written-off time should highlight where the firm chose to remove the value of the fee/time outside of the billing process.

Work in Progress (or WIP)

WIP is unbilled time/fees + unbilled disbursements/expenses.

WIP is the value of items that you are working on that you have not billed for. These are also called unbilled time/fees and unbilled disbursements/expenses.

The total WIP for a matter will be the value of the items if they are added to the bill in their current state.

Fee Adjustment

This term applies to changes made to the total fees on a bill. Often a firm will change the total fees to match a quote or estimate that they have given the client, or just to change the amount to match what they feel is a fair charge.

The total fees can be either increased or decreased:

A user can increase the total fees by adding a new time/fee entry or by adding a positive fee adjustment.
A user can decrease the total fees by adding a discount to the bill or by adding a negative fee adjustment. Discounts and negative fee adjustments are displayed differently on the PDF bill that is sent to the client but for some things (like adding WIP to a draft bill), they are treated the same.

For example, let's say you have a draft bill that had $2,340 worth of fees and you manually adjust the total down to $2,000 to match what you quoted the client. When you add $125 worth of WIP to the invoice, you want to increase the negative fee adjustment so that the invoice amount stays at $2,000.

But in contrast, if you have a draft bill that has $4,300 worth of fees and you manually adjust the total down to $4,100 because you promised the client a $200 discount, when you add $300 of WIP to the invoice, you want the adjustment to remain the same and the total to increase to $4,400.

Fee Allocation

A fee allocation is how a firm determines how much staff members contributed to the amount of the bill. Law firms will judge a lawyer (in this situation called a "fee earner") on how much they contribute to a bill, or how much of what gets billed is because of the fee earner's work.

Most firms will do this by splitting the fee allocation by the value of the fees/time that the fee earner had on the bill. For example, if David records $1,000 of time on a $4,000 bill, his fee allocation is 25% of the bill total.

Actionstep supports settings where you can preset how fees will be allocated on the matter including how any fee adjustments effect fee allocations and accounting for originator fee allocations. However, you can also manually change the fee allocation on each invoice to suit your needs. For example, you might want to ensure that the managing partner gets more of the fee allocation because they managed the client's expectations through the process.