A Primer on Legal Billing Codes
At the core of any billing system, legal or otherwise, are codes that are essentially short-cut terms used to identify a product or service in a way that is concise and immediately relevant for tracking, reporting and billing purposes. For example, most of us have probably seen grocery store receipts containing abbreviated items like T1310 or A2568 which, when expanded by the grocery store’s internal glossary of codes and their associated products, might turn out to mean "36 oz . Blue Dish Soap" and the like. In the legal context, most firms have implemented their own matter coding systems so that they can internally track and reconcile the specific tasks performed for each client and matter. By performing the necessary integrations, billing codes can be translated into their kindred legal service descriptions for accurate and timely billing.
Popular legal billing code systems
Legal billing codes are expressed through various code systems, with two of the most widely used being UTBMS (Uniform Task-Based Management System) and LEDES (Legal Electronic Data Exchange Standard). These codes categorize and classify different categories of legal work (tasks), and they are meant to be used for purposes of uniformity and consistency across the legal industry.
Both UTBMS and LEDES are maintained by committees composed of various stakeholders in the industry, including legal departments, law firms, law schools and legal publishers.
UTBMS was developed in 1995 by the Legal Electronic Billing Committee of the American Bar Association and the National Association of Legal Secretaries, and it continues to be maintained by the Common Codes Committee. UTBMS is coded according to the following specific categories: Activities, Billing, Payment, Case Management, Events, Fees, Invoicing, Matter Management, Non-Billable Tasks, and Expenses. UTBMS is free to use; no license is required. However, if a law firm would like to have its invoices customized with UTBMS codes, the firm must purchase its codes from a UTBMS vendor or a UTBMS Licensee (a law firm that is a licensee is known as a "code subscriber").
LEDES was first released in 1998 and is currently maintained by the LEDES Oversight Committee. LEDES, which is owned by LEDES Consortium, Ltd., is comprised of four different specific subsets of codes — LEF (LEDES Electronic File), LEF100 (LEDES 28x Format – monthly billing file), LEF200 (LEDES 98x Format – single matter file), and LEF300 (LEDES 98x Format – multi-matter file). Usage of some LEDES code sets are fee-based, while others are available at no charge.
The significance of precise billing in law firms
In the ever-evolving legal landscape where client needs are becoming more diverse, understanding the significance of precise and accurate billing practices can’t be understated. The complexity of legal matters often warrants the inclusion of billing codes in invoices as they allow for fine-grained tracking of activities undertaken by lawyers or their staff and make it possible for law firms to further ensure that they are getting paid for the services they render. A basic explanation of the impact of billing on the work that lawyers do can be found in the advocacy of maximising realisation rates and billing by lawyer (for example, a senior litigation associate from a large firm who is billing the client $600/hour charging time spent on court attendances related to criminal proceedings of $400/hour (after all, that is the approximate rate billed by criminal defence lawyers) is a sign that your current matters generally lack supervision at the senior level). The underlying psychology of clients and lawyers with regard to billing codes should also feature in the analysis. Clients are keenly aware of whether or not they are getting value for money, and can be extremely sensitive to charges relating to activities that don’t appear to have any direct association with their matter. At the same time, lawyers are at risk of viewing billing codes as a way to protect their billable hours even if it requires "stretching" the meaning of particular billing codes. Equally, any law firm which allows lawyers to enter their own time is susceptible to unintentional inaccuracy in time recording by lawyers. This can result in the firm itself becoming susceptible to undercharging clients if a law firm does not engage in a robust billing review process before issuing an invoice. One of the biggest risks that law firms face when they don’t deploy appropriate billing code strategies is the potential to lose repeat business if a client feels he or she is being gouged on price or perceives that an incorrect amount of time is being spent on a specific matter. The additional cost consideration is that clients may complain about excessive billing, and may refuse to pay. Depending on the terms of the engagement agreement, such a position may expose the firm to a claim in the event the firm ends up pursuing the client for payment. Correct use of billing codes can set expectations with your clients as to which resources are being used and it gives you a competitive edge.
There are no published standards for the contents of a law firm’s billing code list, however the following broad categories are provided as some guidance: The bottom line is this: Understand the importance of the need for accurate and consistent use of billing codes, improve the accuracy and reliability of billing codes use, use them to support practice management objectives, and to improve time recording accuracy and encourage lawyers’ engagement with time recording.
Challenges with using legal codes
Law firms face immense challenges when implementing legal billing codes and maintain accurate usage of them across their business. These challenges can be across a firm’s entire team (costing money and time) or can be an issue with what matters are managed for a particular client (impacting relationships). There are four key issues that firms have to deal with: As mentioned above, working with legal billing codes addresses both a firm’s business and client matters, both of which are important. A breakdown in either aspect can represent a large financial hit to a firm or permanent loss of a client relationship. There are three major areas of concern when a firm tries to implement a new legal billing codes into their system of code management: the software, education and communication. There are many moving parts when it comes to a firm’s software package and they are all part of a larger legal billing code process. Some firms may be on the latest version of the newest software package and others might use an older version that lacks certain advancements to their code system. Other firms may be looking into acquiring a new software package and any hiccup in this process can mean money out the door or clients lost. And the needs of the firm’s clients has to be considered, too. New software also takes time to purchase, set up, implement and then actually learn how to use it (and feels different for every member of a team). All of these issues are pulling at a firm’s finances and time, along with its members’ energy and attention. If not properly addressed and communicated to staff, it can result in angry clients due to incorrect legal billing codes and a lot of lost profits for a firm. Education is one of the biggest weaknesses that a firm faces when dealing with legal billing codes. It is necessary that a firm properly educates its employees on the importance, creation, implementation, maintenance and updates of legal billing codes. This helps with improving compliance at a firm which means more accurate bills for the firm and all its clients; meaning improper codes that can rollup into larger legal billing code groups being reduced, allowing the remaining lower codes to be spread throughout legal bills more evenly. It also helps with properly identifying and managing legal billing codes as the firm and its staff take on more complex legal issues for its clients. Codes that aren’t properly educated may be used that are not applicable to the clients being transferred from two different firms or for work that has moved to a new platform; codes will also evolve when new software packages are purchased and will need to be adapted. Even if new software is not purchased, many legal codes will slowly change as the market evolves or as they become obsolete and are removed from a software package. Clients will communicate to a firm if they are unhappy with inaccurate legal billing codes and may look to seek another firm. If the firm doesn’t properly identify which legal billing codes are losing them clients, then they need to adapt quickly, get buy-in from staff and start making changes to use legal billing codes correctly. If the firm does this properly, it can help them recover from a set back and strengthen a client relationship along with evolving the firm as a whole. Communication is the third arm of the implementation, have a solid understanding of legal billing codes and using them with accuracy. A law firm needs to properly communicate to its staff early and often about what exactly a firm wants from a software package and what the firm needs with legal codes. It is very easy for large firms to snake a project by being too big for a software package or not being able to properly identify a client’s needs. If there’s a lack of communication, then it’s easy to miss out on important opportunities in the software that would make the transition easier on your staff (user experience can be a large factor in the success of a software project). There has to be a good collaboration and shared understanding between all levels of staff that will be using legal billing codes.
How to implement legal billing codes
Implementing legal billing codes into a law firm’s ecosystem for the first time can be a challenge. However, with proper preparation and training, your firm can minimize the potential issues associated with onboarding the tool, and maximize the benefits of using legal billing codes. The following are a few best practices to follow when adding legal billing codes to your law firm’s billing processes:
Provide users with a codebook. Make sure to give all applicable staff members access to a codebook. This allows them to have immediate access to the codes your firm requires to complete billing tasks.
Assign staff champions. Having one or two champions in your firm can help you solve problems as they arise , and make keeping track of your team’s progress easier.
Get the staff involved. The more your staff knows from the get-go, the better the process will go. Offer adequate training on what is expected from everyone involved, including the creation and maintenance of client informational records. Make sure not everyone feels overwhelmed with the new process.
Create a backup schedule. Having a backup schedule in place can help avoid any hiccups in billing. Make sure the schedule is clearly posted, so everyone is aware of what the process should look like.
Address any technical glitches. Before making any changes to your firm’s billing processes, make sure you have the necessary technology in place to smoothly transition your law firm to the world of legal billing codes.
The latest in legal billing technologies
As technology continues to evolve and impact the practices of countless industries, billing technology for law firms is no exception. One trend that has emerged over the past few years is the use of AI-powered legal billing systems. These systems are designed to reduce the amount of time spent on billing by automating many aspects of the billing process. The systems work by learning a firm’s billing practices and then applying those practices to generate accurate and comprehensive invoices. Over time, these systems can even suggest fees based on a client’s billing patterns and allow lawyers to simply approve or disapprove them.
Billing systems that utilize AI can also allow firms to monitor compliance with billing guidelines imposed by their clients. For example, if a client prohibits billing for certain activities, such as drafting correspondence, an AI-powered billing tool can easily identify and flag a billable entry that does not conform with the client’s guidelines. It can also provide other insights, such as billing patterns, to help a firm better understand how a client has historically used the firm’s services. Firms can then tailor their services accordingly.
The continued evolution of billing technology will also provide unique opportunities to improve efficiency and client satisfaction. For example, since billing can be one of a firm’s most time-consuming tasks, lawyers should in turn expect that technology will provide them with streams of revenue that were previously lost due to inefficiencies. This can be realized through the use of billing systems that offer proactive alerts when compliance with certain billing guidelines is about to expire, rather than providing post-billing checks. Efficient billing can also benefit clients who typically receive a set number of hours of service by informing them when their hours are about to be exhausted, giving leaders the opportunity to adjust their budgets accordingly.
At the end of the day, effective and accurate billing is a direct reflection of a firm’s capabilities, professionalism, and overall workplace organization. With the help of allies like billing technology, lawyers can ensure the most efficient practices concerning every aspect of their work, and that includes billing.
Conclusion: How billing codes benefit the modern law firm
As our look through the history of legal billing codes has shown, these numerical identifiers have come a long way since their origins as a series of broad classifications. Although the coding system is still evolving , law firm staffers are generally able to use specific codes to categorize precise services within their specific area of practice and even their specific document types. The advent of computers has made it possible for lawyers to bill at an itemized level as well.
Our discussion of the evolution of legal billing demonstrates how the introduction of new billing codes to keep pace with modern workflows has enabled greater accuracy and transparency in this key part of the client-lawyer relationship. An industry-wide shift toward alternative and flat fee arrangements has encouraged the use of more detailed coding in the digital age, as firms continue to innovate with their billing practices.
