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In-House Counsel

What is a LEDES File and Why Should Legal Teams Care?

Have you ever heard the words “LEDES file” mentioned, and think to yourself – ‘what is that?’ Don’t worry, you’re not the only one! In this post, we’re sharing what a LEDES file is, and how it helps in-house legal departments uncover efficiencies for more streamlined processes, time savings, and reduced costs.

LEDES File Definition

LEDES is a simple file format with specifications that support hourly billing, flat fee billing, expenses, multiple currencies, and tax. Created by the LEDES Oversight Committee (LOC) in 1995, this informal group of corporate legal departments, law firms, universities, and software vendors sought to address legal e-Billing software issues with a “standard format for the electronic exchange of billing and other information between corporations and law firms.”

The LOC and their guidelines for LEDES format are guided by five basic principles:

  1. Keep it simple
  2. Make it unambiguous
  3. Diverge from existing formats as little as absolutely necessary
  4. Ask only for information the law firm is typically able to provide from their financial system
  5. Meet the needs of corporations, law firms, and legal industry software vendors to the maximum extent possible consistent with the first four criteria

The Benefits of LEDES Format for In-House Counsel & Legal Operations

Ease of Use for Your Law Firms

Your law firms use a variety of e-Billing solutions to submit invoices to their clients, a process that can be extremely time consuming without a standardized process. With its efficient coding system, LEDES format reduces the time law firms spend on invoice creation and task descriptions, while allowing your legal department to accept invoices in a uniform format for ease of processing.

Improved Legal Spend Analysis for Your Legal Department

Another benefit for in-house legal teams is the billing analysis capabilities that LEDES file format provides. Submitting invoices in LEDES format to an e-Billing solution allows legal teams to extract valuable invoice data for a better understanding of where and how their money is spent, and empowers them to control costs by viewing services in proper context. This level of insight can then be used in reporting and analysis to improve overall legal department operations, decision making, and spend management.

How LEDES Files Work

Categorizing spend using LEDES files with activity and UTBMS codes gives you greater visibility into your legal spending. Instead of lumping costs into general areas, LEDES files drill down into the specifics. While a standard PDF invoice might break costs down into discovery, communication, and expenses, a LEDES file with task and activity codes would categorize costs even further.

For example, a LEDES file might include all of the following codes:

With this LEDES file, you have the ability to see exactly how and where money is spent. In this example, you might take a closer look at how much time was spent on research (A102) and the cost of a private investigator (E120). Were both expenses justified, or should you implement a cap on private investigator spend in the future?

Types of LEDES e-Billing Formats

Because LEDES files rely heavily on standardization, it’s important to specify which format your vendors should use.

LEDES 1998

The original LEDES format, LEDES 1998, was created in 1998 but was quickly replaced by LEDES 1998B and 1998BI. LEDES 1998B is a pipe delimited format that contains 24 data fields. Currently, it is the most commonly used format in the U.S. due to its simplicity.

LEDES 1998BI is based on the 1998B format but is designed to accommodate legal bills created outside of the United States. Building off the original 24 data fields, the 1998BI version includes 51 total data fields that cover more detailed information such as law firm and client addresses, currency used, and data by timekeeper.

LEDES image 1

Source

LEDES XML 2000

This XML file format was created in 2000 and includes 125 fields within seven segments:

  1. Firm
  2. Client
  3. Invoice
  4. Matter
  5. Timekeeper sum
  6. Fee
  7. Expense

LEDES XML 2000 has been ratified twice: once in 2006, and again in 2014. Those updates are referred to as LEDES XML2.0 and LEDES XML2.1, respectively.

The XML2.0 update took the total number of fields up to 153 and added eight more segments:

    1. Tax
    2. Tax summary
    3. Matter discount credit
    4. Tax matter discount credit
    5. Fee item discount credit
    6. Tax item fee
    7. Expense item discount credit
    8. Tax item expense

LEDES image 2

Source

The main goal of the 2006 ratification was to better address the complexity of itemizing taxes. In 2014, XML2.1 was designed to accommodate the increasing popularity of alternative fee agreements (AFAs) and the move away from traditional hourly billing.

Does Your e-Billing Solution Support LEDES?

Whether you are thinking about adopting legal e-Billing software, or considering an alternative to your current e-Billing system, look for a solution like SimpleLegal that accepts the most commonly used LEDES file formats. Law firms based in the US typically use “LEDES 1998B” (which cannot be used for invoices with VAT-style tax or any non-USD invoice), while law firms outside the US typically use “LEDES 1998BI”.

If you’re concerned that some of the smaller, boutique law firms that you work with will not be able to provide invoices in LEDES, a solution like SimpleLegal accepts the most commonly used LEDES file formats as well as PDF invoices. Plus, SimpleLegal has the capability to extract the data within your invoices for analysis so you’re collecting all the data you need to make informed decisions.

For more information on modern e-Billing software and how to find a solution that is a good fit for both your legal department and your law firms, download our guide, 8 Ways to Vet Your e-Billing Solution for Law Firm Adoption.

Vetting e-Billing for Law Firms