Understanding LEDES

Many lawyers come to us knowing little about LEDES. While LEDES may sound scary and complex, it’s really not. The following post provides an overview of the benefits and application of using LEDES in a law office setting.

I’m a big sports fan so let’s use baseball as an example to understand LEDES. Every baseball team has a person that’s in charge of throwing the ball to the batter. We call him the Pitcher. The term “Pitcher” is the standard name we give the person that plays this position.

Now, what if the Cleveland Indians called this person the “Thrower?” And what if the Arizona Diamondbacks called this person the “Tosser?” And what if the Chicago Cubs called this person the “Captain?” You can see how it might be confusing to schedule line-ups, keep track of stats, and trade players.

This is essentially the problem that LEDES helps solve…but for the legal industry.

The Techie Definition…

LEDES stands for Legal Electronic Data Exchange Standard. Essentially, it’s the gold standard for how law firms should name and categorize the task, expenses and activity codes used within their case management and time & billing systems. LEDES is a mature standard that has been in use by major law firms for over 18 years. These standards are recommended for accounting, billing and systems integration stability.

Benefit of Implementing LEDES

The original purpose behind the development of LEDES was to help law firms generate invoices that could be easily understood by corporations…helping them get paid for their services faster. But wait, there’s more!

Implementing LEDES also offers the following benefits:

  • Provides starting framework for implementing better digital security, including meeting ISO compliance standards
  • Creates a more scalable data infrastructure, allowing you to more easily implement programs and services that larger firms use to become more successful
  • Requires less confusion on staff members by eliminating the need to gain familiarity with your naming conventions and unique customizations. When staff better understand what they are doing they become more productive and thus more profitable!
  • Better reporting on standard metrics to help visualize profitability
  • Make smarter, more strategic decisions for your firm. E.g. Compare time and efficiency across multiple offices
  • Gain a better understanding of staff productivity to improve resource management. E.g.Identify the most efficient lawyers, paralegals and assistants

Now let’s take a closer look at activity, expense and time-keeper classification codes.

Overview of LEDES Activity Codes

LEDES defines various Activity Codes that law firms are urged to use while recording time entries. This standardization provides benefits of accounting reconciliation and clearly defined activity reporting. These codes may also be referred to as UTBMS (Uniform Task Based Management System) codes. It is worth noting that LEDES defines the categorization codes for various firm elements such as staff member roles within a firm where as UTBMS defines time based activity codes. The two systems are different but closely related standards, a firm should implement both standards.

Using standardized activity codes can provide benefit to your firm by empowering your firm to make use of LEDES / UTBMS accounting, invoicing and reporting systems.

Using standardized activity codes is the first step to creating accurate metrics that can help you better understand where your firms productivity lies. Without using standardized activity codes, it becomes very difficult if not impossible to visualize your firms profitability, and many times leads to uninformed business decisions and loss of profits!

Overview LEDES Expense Codes

LEDES defines various Expense Codes that law firms are urged to use while recording reimbursable expenses from clients. These codes may also be referred to as UTBMS expense codes.

Using standardized expense codes can provide benefit to your firm by empowering your firm to make use of LEDES / UTBMS accounting, invoicing and reporting systems. It can also help to prevent client confusion and conflict of bills by accurately categorizing expenses using non-negotiable industry standards.

Overview LEDES Timekeeper Classification Codes

LEDES defines various Timekeeper Classification Codes that law firms are urged to use while configuring timekeepers within their practice management and time & billing systems.

Using standardized timekeeper classification codes can benefit a firm by serving as the cornerstone of business intelligence and digital security. Using the LEDES timekeeper classification codes can shed light on your staff members and their profitability.

By implementing LEDES standardized timekeeper classifications a firm has a core framework in place to begin implementing ISO compliance as related to digital security.

Using LEDES to Grow Your Law Firm

Let’s dive deeper into some of the firm benefits introduced above. Notably, in each section we see the opportunity to create advanced business intelligence metrics that allow your firm to accurately report on profitability and productivity. In this modern legal age, more and more clients are demanding fixed fee matter resolution, and many firms are adopting this. It is through business intelligence and accurate profitability / productivity reporting that this can be achieved. LEDES is a well-documented and globally accepted classification system that your firm can easily use to define this cornerstone of business intelligence.

Many times throughout this article we discuss the ability to integrate with LEDES / UTBMS ready systems. This is due to the core design of the LEDES standards being well-defined means of exchanging time and billing data from one system to another. It is through this well-documented and globally accepted standard that your firm will be able to more easily implement programs and services that the big law firms use to become and remain successful.

We also mentioned that LEDES starts leading to less confusing invoicing systems and simplify client collection through globally recognized standard (and user friendly) classifications. When your clients understand what you bill them for, they become less combative and more apt to paying you!

Finally, less customization of your current systems, less support required and a better user adoption rate. The potential benefit of these points alone are exponential. The most common problem we see with law firm’s staff are that they don’t fully understand their systems or procedures. By using LEDES billing, you take much of the customized ambiguity out of the system and make it easier for your staff to understand what they are billing for. When staff better understand what they are doing they become more productive and thus more profitable.

For more information about understanding or implementing LEDES in your firm, contact Accellis today!

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