Is LEDES invoicing right for your law firm?

Although LEDES has been a common legal billing format for more than two decades, it’s not uncommon for lawyers with years of experience to struggle to navigate its complex formulas.

If a lawyer’s only interaction with the billing process is time tracking, they may not understand what LEDES billing is or the different LEDES formats. However, for partners, directors and attorneys looking to improve their skills, a basic understanding of LEDES is essential.

Definition of the LEDES invoicing format

Legal Electronic Data Exchange Standard (LEDES) is a billing format created by the Legal Electronic Data Exchange Standard Oversight Committee in 1995. Its purpose is to create and maintain open standard formats for the electronic exchange of billing and other information between corporations and law firms.

Why do law firms use the LEDES invoicing format?

The Legal Electronic Data Interchange Standard Oversight Committee created LEDES as the standard for billing practices for law firms, legal industry software vendors, and enterprises. The goal was to have a uniform standard to keep invoices simple and straightforward for clients while preventing lawyers from providing excessive information on invoices.

LEDES codes, also known as UTBMS (Uniform Task-Based Management System) codes, were created with these principles in mind:

  • Keep the billing process simple

  • Make invoices unambiguous to reduce questions and confusion

  • Allow minimal deviation from existing legal billing formats

  • Only require data that law firms can provide from their existing financial systems

  • Meet the billing needs of the law firm and the entire legal industry

UTBMS codes classify the legal services that the law firm performs and submits as an invoice. There are three types of codes:

  • Task codes: This is a granular description of the service provided by an area of ​​law.

  • Activity codes: These are codes that identify the specific service performed.

  • Expense codes: These categorize the expenses of the law firm.

Instead of grouping costs into general areas that can cause uncertainty, mistrust, and disputes, the LEDES billing process is all about details. A LEDES file with task and activity codes further categorizes costs.

For example, a LEDES invoice can have the following UTBMS codes:

This format shows exactly how and where money is being spent, alleviating customer concern and providing opportunities to optimize spend. For example, you can determine if too much time has been spent on a task that could be outsourced or crack down on lawyers who take exorbitant amounts of time on specific tasks.

Benefits of the LEDES invoicing format

The benefits of LEDES invoicing for law firms are numerous, including:

  • Globally standardized legal invoicing and consistent invoice formats

  • Better overview of legal expenses, including hourly billing and expenses

  • Simplified follow-up for the legal department

  • Reduce the risk of receiving invoices in a non-standard way, such as paper or PDF

  • Reduces invoice processing time and payment — law firms get paid faster

  • Allows quick access and reporting of data on individual line items and details

  • Simplifies audits for billing compliance

  • Minimize customer billing disputes

  • Accurately compile invoices

  • Capture and present important data to business stakeholders and customers

The goal with LEDES may have been clarity, but having a standardized billing process makes the whole system more efficient.

Types of LEDES billing formats

The LEDES Oversight Committee has created several different types of LEDES invoicing formats to standardize electronic invoicing in the legal industry.

  • LEDES 1998: This format was created in 1998 to bring a standard invoicing structure to legal electronic invoicing, but it was later replaced by LEDES 1998B.

  • LEDES XML 2000: This format was introduced in 2000 and contains much more information than the 1998 format. It was retired on March 1, 2022 and included 125 data fields with 7 segments.

  • LEDS XML 2.0: In 2006, the fields for XML were increased to 153 and 8 additional segment types were included, bringing the total number of segments to 15.

  • LEDS XML 2.1: In 2008, XML 2.1 was released to accommodate alternative pricing terms and various math used with third-party timing software and electronic billing systems. The mathematical logic has been standardized in all systems with legal electronic invoicing. This version also includes tax support and more complete data elements.

  • LEDS XML 2.2: In 2020, XML 2.2 was released to support tiered taxes, which increased segments to 18 and data elements to 205.

It is important to note that not all software publishers offer all types of format. When considering electronic invoicing software, look for a solution that accepts the most commonly used LEDES file formats.

How Legal Billing Software Automates LEDES Billing for Law Firms

Legal invoicing software that works with the LEDES format allows you to incorporate automation into the invoice review process and take control of your expenses and expenses. Bill4Time legal billing software allows lawyers to track time and manage billing, and automatically generate bills that incorporate LEDES format to the exact specifications of the LEDES billing system.

The process is simplified — all you need to do is enter specific data in the LEDES format, including:

LEDES can be complicated to use, especially if you do it manually. Law firm management and e-invoicing software provides the assistance you need to track and export invoices in the correct formats.

For staff compliance, you can enable LEDES in system settings and turn it on or off for each customer. There are LEDES specific fields that help export the data into the correct LEDES billing format.

Standardize your LEDES invoicing

Billing in LEDES ensures your law firm is compliant and follows standardized conventions for timers, tasks, and processes. When you have the data you need, you can increase productivity, increase utilization, and eliminate lost revenue

©2006-2022, BILL4TIME. ALL RIGHTS RESERVED.National Law Review, Volume XII, Number 259

About Bernice Dyer

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