In the United States, legal invoices are just about evenly split between the PDF and LEDES file formats.
Though LEDES files are much less common abroad, they do still crop up, so no matter where your legal team is located, it’s important to understand what LEDES files are, as well as their strengths and weaknesses when it comes to legal invoicing.
Below, we’ll explain the background behind LEDES files, and walk you through their pros and cons.
What Are LEDES Files?
A LEDES file is a standardized format for legal invoices that makes it easier for law firms to send, and for in-house teams to receive, bills electronically. LEDES, or the Legal Electronic Data Exchange Standard, was created by the LEDES oversight committee (LOC) in 1995. It is recognized as the industry standard format for legal electronic billing. However, as previously mentioned, it has not received substantial adoption outside the United States.
In addition to making the process of electronic billing more efficient, LEDES files are also designed to help firms and in-house teams understand and analyze their legal spend. By clearly categorizing legal tasks using Uniform Task-Based Management System (UTBMS) codes, LEDES files can provide a detailed overview of different phases of work on a matter and their associated costs.
LEDES File Formats to Know
For those committed to the do-it-yourself ethos, you can still manually create a valid LEDES invoice with nothing more than a spreadsheet and text editor. But now that we’re more than 20 years beyond the standard’s debut, nearly all leading law firm billing systems and corporate legal spend management platforms offer features dedicated to supporting LEDES invoices.
What’s less settled, however, is which specific LEDES file format you should use.
LEDES 1998B
This oldest and simplest of LEDES eBilling formats remains the most broadly used standard. It includes 24 data fields but lacks support for tax information and alternative fee arrangements (AFAs).
LEDES 1998BI
Support for single tax was the critical upgrade here, effectively creating a “98B” clone that was fit for use outside the United States (where legal services are uniquely tax-exempt). As of its 2020 update, this format now contains 52 data fields.
LEDES XML 2.0
Whereas LEDES 1998B(I) produces documents in text file format (.txt), this version used extensible markup language (.xml) to significantly expand the number of data fields to 153. Its most notable updates include support for multiple taxes per line item and AFA compatibility.
LEDES XML 2.1
This version now contains 206 data fields, with increasingly nuanced support for tax, timekeeper, and regulatory issues.
LEDES XML 2.2
This version is nearly identical to its predecessor — with one crucial distinction. It is the only LEDES file format that supports tiered tax requirements.
What Are the Benefits and Drawbacks of LEDES Files?
The LEDES format provided a standardized digital billing format that addresses the needs of law firms, corporations, and legal software vendors alike.
Because it’s a common—and sometimes required—format for legal invoicing, there are plenty of benefits to adopting LEDES files. These include:
Benefits
- They allow legal invoices to be received and delivered in a standardized format
- They speed up invoice creation for law firms
- They can be processed by various legal billing systems
While there’s much to admire about the LEDES format, it’s not a perfect system. In fact, there are often drawbacks or limitations to using LEDES files. These include:
Drawbacks
- Not all law firms can produce LEDES invoices. International firms and smaller firms may not have a billing system that can create LEDES invoices
- In countries where tax is applied on legal invoices, law firms must submit PDF invoices. This means that law firms that use LEDES submit invoices in two formats, duplicating the work of invoice submission
- Finance teams increasingly require PDF invoices for audit compliance. This causes additional duplication of effort if firms submit LEDES invoices
What Alternatives Are There to LEDES Invoices?
The most common alternative to LEDES invoices are PDF invoices. In fact, a Brightflag analysis found that 48% of all invoices for US-headquartered customers are submitted as PDFs. By comparison, 87% are submitted in PDF format for non-US headquartered customers.
Brightflag’s All-in-One Solution
Most legal e-billing systems cannot read and extract information on PDF invoices, which necessitated the creation of the LEDES file format.
However, as explained above, there are significant drawbacks to using the LEDES file format, both for law firms and in-house teams.
Thankfully, modern e-billing systems like Brightflag use A.I. to automatically extract data from PDFs. This gives in-house teams the same experience of reviewing a fully digitized invoice without law firms needing to submit in LEDES. It’s the best of both worlds: the electronic data in-house teams need to pay bills fast and make strategic decisions, without the downside of the LEDES file format.
Conclusion
Understanding the nuances of legal invoicing is the first step in getting a handle on your organization’s billing processes and finding a solution that will increase transparency and efficiency, as well as your organization’s analytical capabilities.
Click here to learn more about how Brightflag can help your team transform your approach to e-billing and save you time.
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