In the complex world of legal billing and invoicing, 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 both service providers and their 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.
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 the exchange of billing information.
The LEDES Oversight Committee (LOC) is an international non-profit organization made up 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 different formats for legal billing, budgeting, timekeeping, rate management, and IP management data exchange.
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.
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.
By keeping complexity at bay, LEDES facilitates a more efficient billing process for all parties involved.
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.
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.
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.
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.
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 were 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:
Categories/tasks are identified by the beginning letter (Worker’s Compensation (WC), Litigation (L), Counseling (C), Project (P), and Bankruptcy (B)) and activities are specified by the number.
Below are examples of 2013 LEDES Oversight Committee Revised Activity Codes:
|Activity Code No.||Activity Code Text|
Activity Code Usage
|A101||Plan and prepare for||Any planning or preparation associated with a matter. Includes budgeting and case assessment services if these are allowed by the client.|
|A102||Research||Any legal or factual research associated with the matter.|
|A103||Draft/Revise||Any drafting or revisions of documents or other material|
|A104||Communicate (within legal team)||Any internal communications within firm or other parties in the legal team representing your client.|
|A106||Communicate (with client)||Any communication by letter, fax, email, telephone, meetings, and conferences with client.|
|A107||Communicate (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.|
|A113||Communicate with witnesses||Any communication by letter, fax, email, telephone, meetings, and conferences with witnesses.|
|A115||Medical record and medical bill management||Any services associated with the review, compilation, digesting, summary, or processing of medical records or bills when performed by in-house only.|
|A116||Training||Training 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 Text||Activity Code Usage|
|X101||Copies/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.|
|X102||Copies/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.|
|X103||Copy 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.|
Any 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.
|X133||Private Investigator, Investigative Reports, Investigative Fees||Any 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.|
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.
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 not only accuracy, but also 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:
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.
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.
It is important that the time and billing software used automatically generates 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 TPA’s. 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 prior to submitting them to avoid rejections:
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 a variety of 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.
While learning a new billing system can seem overwhelming at first, keep in mind the 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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