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The guide to LEDES billing for law firms

The Guide To Ledes Billing For Law Firms
In this guide, learn what LEDES and UTBMS are, their significance in the legal industry, and the benefits they offer to both service providers and their clients.

In the complex legal billing and invoicing world, understanding the intricacies of systems like LEDES (Legal Electronic Data Exchange Standard) and UTBMS (Uniform Task-Based Management System) is essential for law firms and corporations alike.

These systems play a pivotal role in streamlining the exchange of billing information, standardizing legal services categorization, and ensuring efficient communication between legal professionals and their clients.

In this guide, we will delve into what LEDES and UTBMS are, their significance in the legal industry, and the benefits they offer to service providers and clients.

Furthermore, we’ll look at the inner workings of LEDES and provide valuable insights on how law firms can effectively navigate this intricate landscape, ultimately making the billing process more efficient and transparent.

So, let’s get started and demystify LEDES and UTBMS, understanding their role in the world of legal billing and paving the way for smoother, more standardized practices in the legal industry.

What is LEDES?

The Legal Electronic Data Exchange Standard (“LEDES” pronounced Leeds) was created for the electronic exchange of billing and other information between law firms and corporations in a consistent and easy-to-understand way.

It is a globally recognized legal billing and invoicing system first formatted in 1995 by a group tasked with creating a framework for exchanging billing information.

The LEDES Oversight Committee (LOC) is an international non-profit organization of legal professionals charged with creating and maintaining open standard formats for the electronic exchange of information and other information between corporations and law firms.

The LOC offers several formats for legal billing, budgeting, timekeeping, rate management, and IP management data exchange.

The five basic principles of LEDES

LEDES is built on a foundation of five fundamental principles which guide its design and implementation in the world of legal billing and invoicing.

Let’s take a look at them now.

Keep it simple

LEDES prioritizes simplicity in its design and implementation. The standard aims to make the exchange of billing information straightforward and easy to understand, keeping law firm operations smooth.

LEDES facilitates a more efficient billing process for all parties involved by keeping complexity at bay.

Make it unambiguous

Clarity is paramount in legal billing. LEDES seeks to eliminate ambiguity by defining clear data formats and standards.

This principle ensures that the billing information communicated adheres to standardized conventions, reducing the likelihood of misunderstandings or disputes.

Diverge from existing formats as little as absolutely necessary

LEDES strives to minimize deviations from existing billing formats.

This principle promotes compatibility and ease of adoption, allowing law firms and corporations to integrate LEDES into their existing systems with minimal disruption.

Ask only for information the law firm is typically able to provide from their financial system

LEDES acknowledges the importance of practicality. It only requests information that law firms can readily provide from their financial systems.

This approach ensures that the billing process remains efficient and aligned with existing financial workflows.

Meet the needs of corporations, law firms, and legal industry software vendors to the maximum extent possible consistent with the first four criteria

LEDES is designed to serve the interests of all stakeholders in the legal industry. It seeks to strike a balance between meeting the specific needs of corporations and law firms while also accommodating the requirements of software vendors.

This principle encourages collaboration and ensures that LEDES remains a valuable tool for all parties involved.

What are Uniform Task-Base Management System codes?

Originally developed by the American Bar Association, Association of Corporate Counsel, and Price Waterhouse, LLP the Uniform Task-Based Management System (UTBMS) codes (sometimes called LEDES Codes) were designed to standardize legal billing tasks and are generally used with LEDES format invoices. Currently, the LOC is responsible for maintaining the UTBMS standards. Since its inception, UTBMS billing codes have brought clarity to billing and related data analysis. UTBMS billing codes categorize legal work and expenses, whereas LEDES provides uniform data formats for UTBMS-coded invoices to be submitted to the third-party administrator.

UTBMS was designed to standardize the categorization of legal services and expenses so they can be easily identified and analyzed. This three-phase approach is used to identify the services performed:

  • Task codes are a granular description of service provided by an area of law.
  • Activity codes identify the specific service performed.
  • Expense codes categorize expenses on matters.

Categories/tasks are identified by the beginning letter (Worker’s Compensation (WC), Litigation (L), Counseling (C), Project (P), and Bankruptcy (B)) and the number specifies activities.

Below are examples of the 2013 LEDES Oversight Committee Revised Activity Codes:

Activity Code No.Activity Code Text

Activity Code Usage

A101Plan and prepare forAny planning or preparation associated with a matter. Includes budgeting and case assessment services if these are allowed by the client.
A102ResearchAny legal or factual research associated with the matter.
A103Draft/ReviseAny drafting or revisions of documents or other material
A104Communicate (within legal team)Any internal communications within firm or other parties in the legal team representing your client.
A106Communicate (with client)Any communication by letter, fax, email, telephone, meetings, and conferences with client.
A107Communicate (with opponents/other side)Any communication by letter, fax, email, telephone, meetings, and conferences with opposing counsel or other outside counsel not representing your client.
A113Communicate with witnessesAny communication by letter, fax, email, telephone, meetings, and conferences with witnesses.
A115Medical record and medical bill managementAny services associated with the review, compilation, digesting, summary, or processing of medical records or bills when performed by in-house only.
A116TrainingTraining services provided to the law firm or legal vendor and billed as an hourly service. Typically, technical or project training associate with e-discovery.

Below are examples of 2013 LEDES Oversight Committee Revised Expense Codes:

Expense Code No.Activity Code TextActivity Code Usage
X101Copies/Blowbacks/Printing-Black and White (Internal)Any black and white copies, blowbacks, digital prints from images, printing or reprinting costs billed on a per page basis when that printing is performed in-house and not by an external vendor.
X102Copies/Blowbacks/Printing-Color (Internal)Any color copies, blowbacks, digital prints from images, printing or reprinting costs billed on a per page basis when that printing is performed in-house and not by an external vendor.
X103Copy Service (External)Any black and white, or color copy, binding, and reassembly charges when that service is performed by an external party and paid by the law firm or legal vendor.
X114Local TravelAny ground transportation (taxi, subway), mileage and parking associated with local travel. Excludes billable travel time (A115).

If a client requires a more granular breakdown, law firm or legal vendor should submit separate itemized expense line items.

X133Private Investigator, Investigative Reports, Investigative FeesAny Private Investigator costs or the cost of any reports prepared by an investigator or in conducting an investigation. Includes motor vehicle, Social Security, post office, skip/trace, background check and other similar types of investigative reports.

Types of LEDES billing formats

LOC created several different billing format types to standardize e-billing across the legal industry. The two main billing formats are 1998 (B & BI) and XML. The format you use will depend on your needs and the requirements of your clients.

  • LEDES 1998: The original format was created in 1998. Creates a simple invoice and does not include tax. Replaced by LEDES 1998B.
  • LEDES 1998B: Widely used in the United States. Creates a simple invoice and does not include tax. This format will not be updated.
  • LEDES 1998BI: Built on LEDES 1998B to allow for international billing. Allows more information such as timekeeper classifications, tax rate, law firm, and client addresses. Not intended for additional updates.
  • LEDES XML 2000: Introduced in 2000 and contains much more information than the 1998 format. Retired by the LOC as of March 1, 2022.
  • LEDES XML 2.0: Released in 2006 with 191 data elements within 16 segments. Updated to LEDES 2.1 in 2008.
  • LEDES XML 2.2: Released in 2020 to support tiered taxes.

Background on LEDES billing for law firms

LEDES (Legal Electronic Data Exchange Standard) billing standard was developed as a response to the need for a uniform way to transmit billing information between law firms and their clients.

The goal was to simplify and streamline the invoicing process for legal services. The standard was developed by a consortium of law firms, clients, and technology providers known as the Legal Electronic Data Exchange Standard Oversight Committee (LEDES Oversight Committee).

The first version of the LEDES standard, known as LEDES 98B, referenced in the above list, was released in 1998. It was a text-based format that allowed law firms to send invoices electronically to their clients.

Since then, the standard has been revised and updated several times to keep up with changes in technology and industry needs.

One significant update occurred with the release of LEDES XML 2.0, which used XML (eXtensible Markup Language) for more robust data transmission and processing capabilities.

The standard aimed to improve efficiency and accuracy in billing processes, allowing for automated invoice validation and seamless integration with client systems.

Over the years, LEDES billing has become a widely accepted standard in the legal industry, facilitating smooth communication and transactions between law firms and their clients.

Benefits of using LEDES

Medium to large-size firms benefit the most from LEDES billing with some corporate clients requiring invoices to be submitted in the LEDES format. For larger firms with billing processes that include hundreds of electronic invoices each day, the LEDES standardization and automation are crucial for accuracy and efficiency. LEDES and UTBMS codes are generally not required by individual clients who prefer PDF invoices.

Here are the key benefits to using LEDES billing for your law firm: 

  • Efficiency and accuracy: LEDES billing allows for the electronic exchange of billing information, reducing the need for manual data entry. This can significantly improve the accuracy of billing records and decrease the time spent on administrative tasks.
  • Standardization: LEDES provides a standardized format for billing information. This standardization can simplify the billing process, making it easier for both law firms and their clients to understand and manage invoices.
  • Cost savings: The automation and standardization provided by LEDES billing can result in cost savings for law firms. Streamlining the billing process can reduce administrative overhead and minimize errors, leading to more efficient operations.
  • Faster payment processing: Electronic billing systems often facilitate quicker invoice submission and processing. This can result in faster payment turnaround times, improving cash flow for law firms.
  • Enhanced client relationships: Providing clients with standardized and transparent billing information can enhance communication and trust. Clients may appreciate the clarity and consistency of LEDES billing, contributing to positive relationships.
  • Compliance with client requirements: Some clients, especially large corporations and government entities, may require law firms to use specific billing standards such as LEDES. Using these standards ensures compliance with client billing requirements.
  • Detailed reporting: LEDES billing may support detailed reporting capabilities, allowing law firms to generate comprehensive reports on billing activity, expenses, and other financial metrics. This can be valuable for both internal analysis and client reporting.
  • Adaptability to changing regulations: LEDES standards are periodically updated to adapt to changes in regulations and industry practices. By adhering to these standards, law firms can ensure that their billing processes remain compliant with evolving requirements.
  • Integration with legal software: LEDES billing can be integrated with various legal software and practice management systems, providing a seamless workflow for law firms. This integration can further improve efficiency and reduce the likelihood of errors.

How does LEDES work?

LEDES uses a text-based format, so it appears as a text-only file when complete and displays the data in a specific order and format. The text file is then uploaded into the e-billing system and will be read on the receiving end. Below is a sample of the LEDES 1998B format.

Ledes Format Example

Data can be manually entered into the e-billing system, but this is complicated, time-consuming and there is a potential for data entry errors.

What you need to know

The time and billing software used automatically must generate invoices that incorporate the LEDES format according to the specifications of the client. Ensure that the task codes used for each billing entry come from the UTBMS. Invoices will need to be created in the LEDES format and uploaded to the third-party administrator’s site (TPA). There are several TPAs and different clients may use different TPAs.

Once the invoices are uploaded to the TPA site, the site automatically analyzes every entry and will reject entries that are unacceptable. Make sure to review your client’s billing guidelines to fully understand what their billing requirements are, and what they will and will not pay for.  Typically, operating expenses such as postage, fax services, and photocopies will not be reimbursed by the client.

Take advantage of training offered by the individual TPAs. Trust me, spending a couple of hours watching training videos can save you time and frustration in the long run.

Review the LEDES pre-bills very carefully before submitting them to avoid rejections:

  • No block billing: Each task needs to be its own entry. For example, the attorney spends an hour on a telephone conference with the client(L106) and revises the complaint(L103) based on the conversation. In a PDF invoice to a client, the attorney might include both tasks together as one entry. In LEDES billing each task would need to be a separate entry with the hour broken down to reflect the time spent on each task accurately.
  • No clerical tasks: Paralegals need to ensure their entries make it clear that the tasks performed are substantive in nature and could not be performed by a legal secretary.
  • No paralegal tasks performed by attorneys: Just like paralegals cannot bill for clerical work, attorneys cannot bill for tasks that could have been performed by a paralegal.
  • Task description is not provided: For example, task entry: L106 telephone conference with client – 0.4. No description is provided. Instead, enter L106 telephone conference with the client to discuss changes/additions needed in the complaint.

Once the invoice is uploaded, the TPA will automatically analyze the invoices, looking for errors. At this stage, the invoice will be accepted or rejected. Acceptance does not mean approval. There are various reasons an invoice will be rejected at this stage including, timekeepers have not been added to the TPA’s system, the rates billed do not match the accepted rates, invoice dates are incorrect, or UTBMS codes are missing.

After the initial analysis, the invoice goes through the review and approval process, where individual entries will be accepted or rejected. Even if an entry is rejected, there is an opportunity to correct the entry and appeal the rejection.

Conclusion

While learning a new billing system can seem overwhelming at first, keep in mind that UTBMS and LEDES were designed to make the billing process simpler for both law firms and their clients. Utilizing UTBMS and LEDES ensures that your law practice is compliant and follows standardized conventions for timekeepers, tasks, and processes.

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