As a legal professional, you’re constantly generating invoices for clients. That’s important since your job involves helping others with their legal matters. But if there’s one thing we hate as much as a bad lawyer joke is long, confusing invoices. Unfortunately, many times, our billing sheets can be that way. Between legal systems, work habits, and processes, it’s not surprising that many law firms have different ways of doing things. The result can be confusion and inconsistency when it comes to billing clients. If you’re an attorney, you know that standardizing legal invoices is important for your firm. That’s where LEDES steps in.
In this blog, we are going to introduce LEDES billing in a step-by-step guide and how you can make the most out of it.
The Basics- What are LEDES Invoices?
LEDES Invoices are a simple format with specifications to store data that is universally accepted and supports hourly billing, flat billing, expenses, multiple currencies, and tax. LEDES is a standardized system for the legal industry that helps to categorize the tasks, expenses, or activities performed.
LEDES is pronounced as ‘Leeds’. LEDES Invoices are machine-readable documents that need the information to be displayed in the correct format. Using a universal format system these invoices can be directly integrated into a company’s financial system.
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Why does your law firm need LEDES Billing?
1. You bill precisely for work your firm did and maintain clear firm-wide billing and performance standards.
2. Widely accepted as the industry standard, eliminating the need for educating new clients and new hiring about billing practices.
3. Decrease the chances of risk and errors due to reconstructive billing procedures.
4. Automate your billing functioning for your law firm.
5. Maintain staff standards; no need to relearn hefty codes and formats.
6. Accurately assess performance in the law firm by role, office, and data range.
7. Record and present data in an easy and digestible format.
8. Compilation of invoices becomes easy with LEDES Billing.
9. Uniformity and standardization of invoices lead to greater efficiency and productivity.
10. LEDES formats are designed to be as ambiguous as possible to make them as easy to understand for law firms.
11. Minimize the risk of client billing disputes.
12. Maintain ISO standards for law firm billing and invoicing transactions.
13. Maximize profitability, and quickly identify the profit and cost centers.
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Most commonly used LEDES formats
LEDES Billing has evolved since its first release in 1998, the LEDES format has been adjusted and adapted according to technological trends to allow more flexibility. Most corporate clients mention what type of LEDES format they want for their billing and invoicing. Although there are a few formats used in the legal industry, in this blog we are going to discuss the ones that are being used and accepted widely.
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LEDES 1998
It was the first LEDES format that was introduced in 1998. LEDES 1998 is no longer accepted as a legal industry standard.
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LEDES 1998B
LEDES 1998B is a plain text file format used for the exchange of legal documents and data in the United States. Introduced in the legal industry after LEDES 1998, 1998B LEDES invoices are to this day the most accepted and widely used of all the LEDES formats. These plain text files have 24 fields. Although newer flexible formats have been released since its introduction, it’s still the most popular file standard for the legal industry.
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LEDES 1998B1
This has been a popular format for many years now and has been used by hundreds of companies throughout the world. It is based on the popular LEDES 1998B format, with some modifications to make it adaptable for legal invoices generated outside of the United States. These files include all the same fields as 1998B. The only addition is that it also requires the client’s TAX ID. This format is perfect for invoicing from other countries where LEDES is not required or where you just need a different layout than what was provided by your accountant or tax consultant.
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LEDES 2000
LEDES2000 is an XML-based legal billing format that was introduced in 2006. It’s similar to LEDES 1998B, but it has some modifications designed to make it simpler, more flexible, and universal for legal e-billing. The goal of this standard is to allow firms to adapt invoices to specific client needs without breaking the format. Many firms were initially slow to adapt to this new format, adhering instead to the 1998B standard. However, it’s now widely accepted and used by most law firms.
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XML 2.1
XML 2.1 is an XML format used by law firms, clients, and third-party billing software to standardize math logic between parties. It was released just two years after XML 2.0 and made improvements to make the format more usable for these purposes. The XML 2.1 file is in the .xml format and includes 16 segments and 191 data elements.
What are LEDES Codes?
UTBMS codes, often described as a Uniform Task-Based Management System, are codes that categorize lawyers’ activities and tasks with a standardized set of uniform codes. These Codes can simplify how lawyers work, and bill their clients, and lawyers can also track their time by assigning the codes and tracking their day-to-day billing activities.
There are four sets of codes:
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Task Codes
Task codes are created and maintained by the firm’s task code management system. They categorize legal activity by the area of law that is practiced. Their five types include litigation, counseling, project, bankruptcy, and trademark.
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Activity Codes
Activity calls are also called fee codes, these codes add additional information to task codes such as attending events, speaking with your clients, and researching.
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Expense Codes
These codes categorize expenses you incur while doing activities on behalf of your clients, such as traveling, renting out services, or any expense that your client is liable to pay. Expense codes work independently from activity codes.
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Timekeeper Codes
Timekeeper codes are vital for maintaining digital security and calculating the profitability of individual team members. These simply refer to the job title of the timekeeper billing hours to a client. These can be used to easily identify which client is being billed for what task, and also help with calculating employee productivity.
For example, a client may mention certain activity codes that can or cannot be used with certain task codes. The invoice generation will be rejected by the client’s system if these rules are not followed. However, we can enforce proper validation of time entries according to the client’s custom requirements. In our system, clients can also put custom task/activity/expense codes.
Why is CaseFox one of the top leaders in the LEDES billing industry?
Invoicing according to the correct legal industry standards is vital for any law firm for the seamless flow of information and transparency in billing. We understand that LEDES invoicing can be hectic and tedious, but CaseFox legal billing software makes it easy, perhaps the easiest amongst all other software.
To generate an LEDES invoice, you don’t need any additional details other than entering a few additional pieces of information such as law firm ID, and client matter ID, no additional steps are required to generate LEDES Billing.
CaseFox further simplifies and streamlines the process by allowing you to generate multiple LEDES invoices for all cases and clients with just one click and then download all generated files. Multiple LEDES invoices for the same client can be combined in one file so that there is only one file to upload to your client’s billing system.
To know more in detail about how to create LEDES invoices, refer to this video.
How to Create LEDES Invoices in CaseFox?
Summing Up
LEDES billing is already part of many firms’ daily practices. However, there are still those that are hesitant to accept LEDES invoices and have not fully embraced the standardized billing method. To build a financial system capable of handling the demands of modern law firms, including payments, invoicing and data exchange, we need to standardize our repeatable processes and ensure that our backend software is up to date with the legal industry’s latest standards.
This will allow for a smoother workflow, simpler processing, streamlined management of financials from various departments, and reduce manual work whenever possible. Overall, this should increase compliance as well as save time and money. I hope this article will help solidify your knowledge of LEDES billing and support your transition into the Standardized Legal Data Exchange. And that’s it—you’re a LEDES billing pro, with the knowledge to go out there and make legally binding invoices! There are plenty of other resources and guides on this topic, but we hope our practical guide will serve as a helpful introduction to legal technology.