E-Billing

Any list of tasks should allow you, as well as being able to record time and expenses, to invoice or bill those time and expenses recorded against these tasks. These bills can either be entered directly into an application or loaded electronically into the application via e-billing.
When someone is producing the invoices or bills, this is generally called e-billing, when someone is collecting or receiving these bills these systems are generally called cost or spend management systems.

About Electronic Billing

Firms, especially the finance departments within those firms need to equip themselves with the tools necessary to conduct business as efficiently as possible. Firms consider e-billing over the paper method to realise benefits in terms of themselves and their clients/suppliers, these benefits include, when implemented correctly, a more consistent and automated invoice review and payment process, simple invoice submission procedures and various collaborative tools which can be used for budgeting and performance measurement.

The difference between e-billing and billing is that an electronic file is created which contains information which can then be extracted and used by both the firm and its client, where with normal billing a paper or PDF/email a copy is sent to the client where the client cannot then easily extract and use that information.

How these invoices are structured is based around two principles;

• the first is to cater for standards set out government bodies these include tax regulations, and regulations on how the sending of electronic invoices must be met.
• and then there is the invoice file standard itself showing how the electronic invoice should be formed, these can vary by business type, for law firms for example, the Legal Electronic Data Exchange Standard was developed.

Advantages for firms receiving e-bills from their suppliers

In summary the following are the main advantages of receiving e-bills;

• Facilitates easier internal routing of invoices for approval (workflow)
• Get a better understanding of legal spend
• Improves quality of data, so better reporting
• Better for the environment
• Allows formulation of alternative fee structures
• Potential to harness discounts by being able to pay earlier

Advantages for firms in sending e-bills to their clients

In summary the following are the main advantages of sending e-bills;

• Improves quality of data, so better reporting
• Improved ability to comply with client billing guidelines so quicker collection cycles
• Faster dispute resolution so quicker collection cycles
• Better for the environment

About LEDES

LEDES is an e-billing format orientated for invoices or bills between law firms and their clients, largely used where the firm works on behalf of many of their client's clients, for example for where an insurance firm contracts out its work to a law firm for the cases it receives. Clients of firms can demand that they be sent invoices electronically and in a standard file format. E-billing standardises, improves and streamlines the billing/collection cycle.
E-billing, when implemented correctly, holds efficiencies for a firm as it allows faster collection cycles, and holds efficiencies for its client as it allows them to more easily analyse and report upon costs.
The LEDES (Legal Electronic Data Exchange Standard) e-billing format was developed by the LEDES Oversight Committee (LOC), a non-profit established by legal professionals, to aim to achieve these benefits for Law firms and their clients.

With e-billing, a client of a firm get this efficiency by more easily;

• being able to keep track of the bills related to a case
• being able to ensure a firm is complying with the original contract
• being able to ensure compliance to their internal budgets, and the ones proposed by the firm
• being able to ensure hourly rates and expenses reflect any original agreements
• being able to compare service time from one firm to that of another firm (providing the client is able to correctly analyse efficiencies based on wins vs cost rather than looking at a base rate alone)
• being able analyse any metric based on bills received more easily

This ability to perform these actions electronically, in turn leads to the promise of the faster collection cycle for the law firm.

History of the LEDES format

• in 1995 Price Waterhouse and a consortium of legal industry time and billing system and case management system vendors had a meeting to establish a set of standards. Some ideas were created and some flat file (pipe delimited) formats produced but there was no widespread adoption.
• in 1998, the group created a new format based on the 1995 format and named it LEDES 1998, this provoked more interest.
• in 1999, the group reconfigured the format and reintroduced it as LEDES 1998B, but this was not yet fully compliant with some jurisdictional standards, so the work was not over.
• in 2000 the Ledes oversight committee then created a new e-billing standard called the LEDES 2000 format. This format relies on extensible mark-up language or XML, which provides for greater control and flexibility. The format was intended to better capture information concerning alternative billing arrangements and to include data fields for the collection of tax information. This was however was mainly US centric.
• In 2005, the Ledes Oversight Committee rewrote the flat file in XML creating a standard to better capture tax and invoicing information that was common in markets outside of the U.S. This version of the new standard, LEDES XML 2.0, was approved in 2006 and additionally contained details on how the math is calculated in an invoice, included the ability to itemise complex taxes, bill alternate fee arrangements, provide credits and debits on a matter, support multiple vendor tax identification numbers.
• In 2008, the LOC, relying on feedback from international law firms and companies, approved and released LEDES XML 2.1which can be validated with our validation tool above.
• from 2006, additionally and in parallel to the above, a U.K.-based group called the Legal IT Innovators Group (LITIG) proposed an e-billing standard based on the LEDES 1998B format producing an international version of LEDES 1998B known as LEDES 1998B-International.

For these different formats then, although LEDES 1998B-International does provide some tax-handling capabilities, there are a number of functions that the XML version provides that the flat file does not. For example, due to the flexible nature of the LEDES XML formats, the XML file can capture taxing information by use of segments rather than having to store tax information on every invoice line. In addition, the XML file supports the need to store a tax in a different currency to the invoice currency. This is typically used for mixed currency situations only, where the invoice is sent between jurisdictions, where it is mandated that the total tax must also be reported in a different currency. Also, the 1998B-International file only allows for one tax to be associated to an invoice line, while the XML file allows for multiple taxes to be associated to a single invoice line. This is required among a number of international tax jurisdictions as well. Although the 1998B-International file allows for a law firm country code to be associated to an invoice line, the XML version specifically requests work location for either a fee or expense line that will be used to verify if tax is required to be billed on the invoice line. In short, when it comes to an international legal e-billing standard file format, XML is a more robust and extensible format and can better assure accurate and compliant legal e-billing. This is the main reason why the LOC has announced that the 1998B-International format will likely not be modified in the future. Rather, any international submission issues will only be represented in the LEDES XML 2.0 and 2.1 formats hence the validator being provided for XML 2.1.

E-Billing Formats

The LEDES 1998B standard relies on the use of a flat file, much like an Excel spreadsheet. Columns represent different data points while rows contain the specific invoicing information.
The XML versions 2.0 and 2.1 rely on the use of an XML formatted file. XML data is known as self-describing or self-defining, meaning that the structure of the data is embedded with the data, thus when the data arrives there is no need to pre-build the structure to store the data; it is dynamically understood within the XML. The XML format can be used by any individual or group of individuals or companies that want to share information in a consistent way.

About Phases and Tasks

Important for both the firm and the client is to have a consistent set of codes to invoice and report against. If all firms collect and invoice their time and expense in a consistent fashion the client is them able to contrast and compare services across firms and a consistent dialogue be operated across the industry.
Certain work typesor disciplinescan be worked upon for example in a law firm, the following would be work type or disciplines;

• Bankruptcy
• Counseling
• eDiscovery
• Governance Risk & Compliance
• Intellectual Property
• Patent
• Trademark
• Knowledge Management
• Litigation
• Mergers & Acquisitions
• Project
• Workers Compensation

These work types can then be broken down into phases, for example, a bankruptcy case might have phases of;

• Administration - Gathering information about the case and holding creditor meetings, considering avoidance actions.
• Operations - Gathering information on and advise on the operational aspects of the business.
• Claims and plan - Gathering information and producing proposed business plans for restructuring if applicable.
• Related advice - Other miscellaneous advice.

These phases can then be broken down into tasks, for example, for bankruptcy operations, the tasks might be further broken down into;

• Business operations
• Employee benefits/pensions
• Financing/cash collections
• Tax issues
• Real estate/property
• Board of director's matters

Whilst working on any or all of each of the groups of tasks (phases), you will be performing certain activitiessuch as;

• Planning and preparing for something
• Researching something
• Drafting/revising a document
• Review/analysing documents
• Communicating within your own business
• Communicating with a client
• Communicating with other outside counsel
• Communicating with other external bodies
• Appearing for/attending court
• Managing data/files
• Other miscellaneous activates
• Travelling
• Communicate with witnesses if applicable
• Communicating with experts
• Organising medical record and medical bills where applicable
• Training
• Special handling copying/scanning/or imaging
• Collection Forensic
• Culling and Filtering
• Processing
• Review and Analysis
• Quality assurance reviews and control
• Search creation and execution
• Privilege review culling and log creation
• Document production creation and preparation
• Evidence/exhibit creation and preparation
• Project management
• Collection closing activities

For law firms a proposed way of providing these standards codes was by means of a Uniform Task Based Management System (UTBMS), these codes can be seen on their website under the "UTBMS by type" section and are now managed by the LEDES committee.

Types of bills

Clients may have many different types of billing arrangements with firms. Some of the many types of billing arrangements include:

Standard fee arrangements

• Standard billing on standard hourly rates, where the client pays for each hour spend delivering services by the firm

Alternative fee arrangements

• Task or unit based billing where identified tasks or components of the transaction are used to measure the fee, where budgeting is required by the client and rates are set for various tasks rather than resources.
• Discount to standard hourly rates, for example where the firm usually bills at 300 per hour, but where the client has managed to negotiate a 2% discount to these rates. This fee might be negotiated for the whole service or just part of it for example where contract drafting, since some contracts are based on a template, the lawyer charges a fixed fee.
• Fixed or flat fee, where regardless of the work a fixed amount will be charged.
• Capped fee, where time will be billed as usual but an agreed limit will not be breached.
• Retainer arrangements, where money is paid up front or on a regular basis to secure access to services. The retainer fee gives a budget certainty and is calculated to equate the value provided.
• Contingent or success fees, where money is only paid by the client for a favourable outcome. A common example in litigation might be a personal injury case based on a recovery.
• Percentage fee, where a percentage fee is based on a schedule of fees related to the amount involved in the matter being handled. For example where a fee is charged based on the value of real estate being purchased.
• Pre-payments, where monies for expected bills are padi up front.
• Volume discounts, where a lower rates are offered if a greater amount of service is requested.
• Blended hourly rate, for example where the various rates for different types of work are averaged out into a single blended rate.

Any e-billing standard needs to cater for these types.

Taxes

For firms issuing invoices they are required to charge taxes on their services and remit the VAT to their local authorities. Companies may be able to recover the invoice taxes from the country to which it was paid by following that country's tax recovery procedures. However, there are some difficulties for companies due to the variety of requirements for specific countries that are involved in recovering these taxes. As tax amounts can be large, this is a very important area for all companies and requires diligence by all parties involved with the invoice to ensure that the taxes will be recoverable hence the need to hold details of the taxes in the format. Below is an example of how one set of taxes can be dealt with;

Valued Added Tax

All tax departments in countries in the EU can accept electronic invoices for VAT recovery as long as guarantees have been provided for the authenticity of the invoices origin and for the integrity of the invoices contents.
To guarantee the authenticity of origin and integrity of the invoice there are some considerations:

• When using Electronic Data Interchange (EDI). In this case, the parties agree on an EDI standard and the security requirements as laid out in an EDI agreement.
• When using Electronic signatures. Electronic signatures are another accepted method. In addition, the Directive allows for member states to require that the electronic signature be based on a qualified certificate and created using a secure signature creation device.
• Other electronic means. This general option leaves it up to the member country to define 'other electronic means' and to determine if they are allowable in their country.
• the invoice must be stored in a manner so as to meet the requirements for guaranteeing the authenticity of origin and integrity of the invoice for the entire storage period of the invoice.
• The invoice must also be readable and stored in the same format in which it was transmitted.

As some countries require invoices to be stored either in the country or state issuing the invoice or in the country of the invoice recipient it is important processes are considered to ensure the invoice is stored in the right country and for the right amount of time.
Access to any tax authorities who need access should also be considered.

There are a number of rules which apply to the provision of details regarding the invoice for tax purposes, see UK vat record keeping instructions here.

Mainly the rules relate to the content of invoices sent, for example the following must be present;

• an identifying number which is unique (and follows on from the number of the previous invoice);
• the firm's name, address and VAT registration number;
• the time of supply (tax point);
• date of issue (if different to the time of supply);
• the client's name (or trading name) and address;
• a description which identifies the goods or services supplied showing;
• the extent of the services;
• the charge made, excluding VAT;
• the rate of VAT;
• the total charge made, excluding VAT;
• the rate of any cash discount offered;
• the total amount of VAT charged, shown in sterling.
• the unit price.

It is important to note that if you issue a VAT invoice that includes zero-rated or exempt items, you must show clearly that there is no VAT payable on those items show the total of those values separately.

These items are addressed by the LEDES format as follows;

• <inv_id>holds a sequential number based on a series which uniquely identifies the tax document by requiring that each invoice have a unique invoice number that has never been used before by the firm for the client being billed.
• <inv_date>relates to the date of issue i.e. when invoice was created/issued by the firm.
• <lf_vendor_id>,<lf_id>,<lf_name>,<lf_address>Name, address, and registration number of firm supplying the services or goods ; The <lf_vendor_id>field designates the tax reg. number of the firm in the system. The firm may use <lf_id>to identify other identifying numbers of the firm such as the Dun and Bradsteet number. Registration numbers should be prefixed with "GB".
• <cl_name>and <cl_address>identify the name and address of the client to whom the services are supplied. The address segment allows for specific identification of the client address information of the client entity receiving the services.
• <charge_date>is used for the time of supply and is located on each line item within the invoice and identifies the date of each unique service provided.
• <units><charge_desc><total_amount><tax_rate_percent> for each description the quantity of goods or extent of services provided. also the rate of tax and the amount payable (excluding tax), expressed in any currency. The rate of tax (VAT) is associated to the line item by the specific tax type (whose definition specifies the rate) on the line item. The amount of the line item excluding VAT is contained in the file at the line item level.
• <inv_total_net_due>or <matter_total_due>The total amount payable, excluding VAT, expressed in any currency.
• <inv_total_tax>is for holding the total amount of tax chargeable, expressed in invoice currency. In addition, totals are available by particular tax type.
• <inv_total_tax_other_currency>is for if the invoice is in any currency other than the source currency, where this field can be used to note the source currency amount of tax due as it is often a requirement of the invoice issuing jurisdiction to hold this value.
• <inv_desc>the invoice description is a free text field used by the firm to describe the invoice. For example in the UK where needing to include information about taxes you can insert, 'Not a VAT Invoice' or 'VAT Invoice'.
• <tax type>and/or <tax ID>firms can designate for clients the tax type at the line item level and/or within the tax segment.
• <cl_tax_id>The VAT registration number, if any, of the recipient of the supply of goods or services and which registration number, if any, shall contain the alphabetical code of the member state in which that recipient is registered.

Different countries and states of course have different rules for taxes. Here are some links to some countries regulations to learn more;
European Union taxation rules
UK taxation rules

E-Billing workflow

Billing system providers may put their invoices into an e-billing format that conforms with the client's requirements so the format can be submitted directly to the client. The firm is then able to automatically output the required format without manipulating the data or doing extra work, and can submit it directly to the client or through an e-billing vendor to the client.
The client or e-billing vendor then reviews the data and might send it back to the law firm or reject it outright for any number of reasons.
When the client receives the final, detailed e-bill, it's able to import the bills into a separate database or case management system for analysis in-house or with a third-party auditing firm.

LEDES E-Billing XML File Validator

Just below is an example of a LEDES format bill, and here are a couple of sample files in case you want to validate a file but don't have time to create your own, or for if you just want to check the validator is working. Simply download the files (right click, locate desktop or other directory, press ok/close to save), then upload into the validator to see the results;

Sample (1), right click this link and save as to download a valid LEDES billing file;
Sample (2), right click this link and save as to download an invalid LEDES billing fileto demonstrate validation errors;
These formats provide a good example of how bills can be loaded for a set of tasks.
Here is an example of data displayed in the latest LEDES format (LEDES XML 2.1);


This page enables the validation of a LEDES XML 2.1 format file.
If you would like to validate your own file (it has to be the latest standard provided, LEDES XML 2.1), simply create your XML file, then select it using the dialog below. The results of the validation will be placed into the window above.

Upload

E-Billing implementation

E-billing systems, systems to create e-bills, can be written in-house to go direct to a vendor, or can be written in-house to goto an intermediary which then goes to a vendor. When implementing an intermediary for e-billing, be very involved in the e-billing vendor selection and work with your clients to choose a vendor thats easy to implement and easy to use, for both of you.
Examine the vendors past implementations to determine how long they took, how complete they were, etc.
Examine what they are offering in terms of functionality, what you are looking for, at least is;

• Easy building of templates for each of your clients (based on their guidelines, rules, etc.)
• A library with already available different bill formats in order to optimize efficiency
• Ability to validate each invoice against the rules and guidelines for the client
• A single upload interface
• Automated tracking of rejections and invoice status in a single database (no matter the client or e-billing vendor)
• A mechanism that allows for the input of comments, status, and information about individual invoices.

Make the transition slowly. Plan ahead and give yourself plenty of time before stopping production of paper copies.
Train multiple people on how to do the e-billing, and test the system for at least a month before going live.
While some client demand that their suppliers stop paper billing by a certain deadline, chances are most will be flexible to your needs.
Ensure each clients guidelines and a list of task and activity codes, (e.g. UTBMS codes) you need are accessible so that you're inputting information correctly the first time.
If the client has its own code set, your software should let you set up the code set you need to accommodate the time entry (and cost entry) seamlessly and in the same manner as the UTBMS code sets. Keep your staff trained and consistent.
Many of the issues associated with e-billing can be traced back to incomplete information communicated between the law firm and the client at the offset.

Bills of Cost

Another potential use of a standard set of codes in the United Kingdom is for the planning and production of bills of costs submitted to the court, used to assess how much can be claimed back between two parties.
The review of these costs is split into a few phases;

• Costs budgeting
• Statement of Costs (Summary assessment).
• Detailed assessment.

Costs Budgeting

Where a case is issued to the Multi-track, the parties can be forced to submit a budget or accruals for their costs, which the Court can then approve.
All parties must file a budget, unless they are a litigant in person. If a party does not file a budget, it "will be treated" as only budgeting for the costs of any appropriate Court fees. The costs of preparing a budget can also be claimed. This is an important extension of any legal ebilling system, the ability of the law firm to create a budget, the client can approve and automatically track with each successive invoice being received via E-Billing.

The budget might be for the life of the case or set up to track spending through a particular phase (e.g. discovery). Budgets can then be reviewed or reset as the case continues on.
Alerts can be built in to e-billing systems to warn of potential cost overruns at various stages of the claim to avert surprises. Follow this link to see an example of a budget file xml upload.

Summary Assessment

This is where a court will consider a schedule of the costs incurred usually, no more than two pages long. Usual for hearings lasting no longer than a single day, for certain appeal hearings and for the costs of the paying party in detailed assessment hearings.
Use the following link to see the type of form used. Search for form N260

Detailed Assessment

Where the successful party files with the court a detailed breakdown of the costs and expenses/disbursements incurred on the case, known as a bill of costs which sets out the successful party's claim. The bill is usually prepared by a law costs draftsman, whose skill is often as essential to successful recovery of costs. An officer of the court, Costs Judge or District Judge will then assess the reasonableness of the costs with reference to a statutory schedule of limits of entitlements of costs, together with legal precedents, unless the costs can be agreed between the parties. A court order for costs is enforceable as a debt against the unsuccessful party.
The format of bills used has been broadly based on ledger books and free format making it relatively easy for costs not to be transparent.
Recent reviews have asked for the process of generation of these bills to be improved such that at any given point in a piece of litigation a bill of costs can be generated automatically that bill of costs must contain the necessary explanatory material, and be able to be presented at different levels of generality. This will enable the solicitor to provide either (a) a user-friendly synopsis or (b) a detailed bill with all the information and explanation needed for a detailed assessment or (c) an intermediate document somewhere between (a) and (b). The software must provide for work which is not chargeable or work which is written off to be allocated to a separate file.

An example of the most recent form to use can be found at the following link Detailed assessment

E-billing Reporting and Metrics

Once figures are stored it is easy to report upon the data sent.
For example, a detailed review report example follows for the bill shown above;