Why Are Legal Billing Codes So Widely Used?
The Uniformed Task-Based Management System (UTBMS) is a legal billing methodology that uses codes to organize and classify both legal work and any potential expenses that may be accrued. UTBMS is most often used in concert with the Legal Electronic Data Exchange Standard (LEDES).
Law firm invoices in the LEDES format provide an easy way to analyze legal bills using the classifications provided by UTBMS.
With UTBMS came increased clarity and standardization to legal billing. Additionally, these billing codes allowed for more extensive data analysis, providing attorneys, law firms, and clients with the ability to more precisely course-correct to improve efficiency and productivity.
The standardization provided by these systems makes it exponentially easier for clients and law firms to track specific legal tasks and expenses, creating data on which reliable pricing, productivity, and cost-improvement strategies can be implemented.
This is not dissimilar to the data analysis portrayed in the movie “Moneyball”. In the movie, the protagonists used statistics of the prior performance of baseball players to better inform coaching decisions and produce improved performance going forward. Their reliance on data analysis flew in the face of traditional staffing and coaching conventions that relied primarily on intuition and, at times, flat out superstition.
The similarities between data analysis in sports and law firm management are genuinely quite striking.
A recent article in the Illinois Bar Journal explains, “When it comes to optimizing your practice, do you trust your gut? Don’t. If you aren’t using data to measure what works and what doesn’t, you can’t be sure you’re winning the game. The good news: your practice generates the data you need to gauge success and adjust as needed.”
How They Help
Increasing transparency through the use of an accurate measure of a law firm’s profitability and productivity is the entire purpose of UTBMS/LEDES coding.
For clients, it provides a detailed account of exactly for what they are paying. It also allows them to seamlessly compare the billing efficiencies of one law firm to the next.
The law firms also benefit from capturing meaningful billing data in a standardized and more easily reviewable way. Additionally, these codes simplify the testing of compliance with guidelines for outside counsel billing.
International In-house Counsel Journal notes that “[a] process that provides for actionable information from that data is central to being able to manage a legal department strategically and with greater efficiency. This is why the Uniform Task-Based Management System (UTBMS) code set is critical when looking at process improvements.”
Analysis of billing data for process improvements would not be possible with the nebulous billing practices of the past. If the text descriptions for similar work and expenses varied wildly, the data produced would be largely useless. Information on legal spending decisions would have to be tediously examined on a matter by matter basis or made dependent on subjective and idiosyncratic manual review.
A recent Legal Talk Network podcast highlights the importance of having demonstrative evidence of your firm’s performance. The podcast asserts that “It’s using data to demonstrate your expertise and to compete now on data, not just on kind of reputation or relationships maybe from the past, but to compete on data to showcase your expertise. And secondly, after winning business is winning cases. So using data to determine the best strategy in front of a judge, to size up your opposition, to understand how long it’s going to take to do your budgeting, all that part of winning cases.”
Course of Action
Unfortunately, there is an issue that stymies the full potential of implementing UTBMS/LEDES coding. It is the manual application of the coding that is time-consuming, monotonous, and prone to idiosyncrasies and human error.
This is all on top of the fact that billing (including task coding) is not itself considered a billable task.
Fortunately, where there is a technical or processing problem, technology is often not far behind with a number of solutions.
Applications are now available to address, mitigate, and even remove entirely the headache of manual task coding and compliant invoice formatting.
When a standard or process is created, technology typically follows behind. There are various legal tech applications that have the ability to streamline these processes and standards.
But, there are a few things needed prior to implementing this technology. Of course, technology is most effective when the processes they seek to automate are written in stone as opposed to existing in a state of flux.
A recent article in Inside Counsel elaborates on this idea by saying, “While technology is requisite as an enabler for managing legal invoices, effective control rests on the creation of robust billing guidelines and accurate data collection… factors like the development of robust billing guidelines, the strict use of UTBMS codes, and the subsequent review of every line item of every invoice for conformance to your billing guidelines are prerequisite.”
As soon as the preliminary work is done on your end, it is just a matter of doing market research to find out which of the existing applications best meets your firm’s everyday needs at a price point with which your firm can manage.
Applications like Thompson Reuters’ Legal Tracker (Serengeti), LexisNexis’ CounselLink, and Wolters Kluwer’s TyMetrix 360° all provide clients with efficient means of bill reception from outside counsel, invoice and payment tracking, and internal data analysis.
On the law firm’s side, there are applications like Clio, Rocket Matter, PracticePanther, ActionStep, and Timeslips (among others) that provide platforms for practice management in addition to systems integrating UTBMS coding and LEDES invoicing formats.
Still, even these applications require the use of drop-down boxes and the individual manual selection of each and every task or expense in order to get the full use and benefit of the system. Even this method is time-consuming and prone to human error.
That is why several applications now fully automate the task-coding process as well as automatically create compliant, formatted invoices.
Not only does this make the process exponentially faster, freeing up time for tasks that are actually billable, but it also cuts down on the possibility of human error.
The automation of the UTBMS coding process is accomplished using artificial intelligence (AI) and machine learning based on a law firm or legal department’s own billing or invoice data.
The apps learn from and apply the specific styles and preferences of a client or law firm, cutting down on idiosyncrasies and human error, while providing accurate UTBMS codes in a few quick button presses.
These advancements are represented in a Deloitte report that mentions, “current technology advances are providing opportunities to better measure, manage and optimize legal spend, even while leveraging conventional management tools. The advancements are expected to enhance management activities for both corporate law departments and law firms, and potentially allow the promise of activity-based management for legal activities to become better realized.”
A recent article in Bulls Eye’s Expert Legal News echoes these sentiments on the virtues of using data to forecast outcomes by noting, “[l]egal analytics seems to take this to the next step by mining data in case dockets and filings, and then aggregating the data to reveal trends and patterns in past litigation that can be used to inform legal strategy.”
There’s a reason that many corporate and institutional clients now require the use of UTBMS/LEDES coding. It is effective. Even if the clients may take nothing more from the coded entries than the considerable transparency it provides, law firms are able to use it as an additional tool in their arsenal.
Every matter completed using these automated coding systems provide more information on how to improve both legal and managerial practices moving forward. With the hurdles of clunky implementation ironed out by the use of affordable and easy to use apps, it is certainly a win-win situation.
Conclusion
If your law firm is not already making use of UTBMS and LEDES standards, or is just treating them as a necessary evil to get invoices aid, it is losing out on a treasure trove of valuable information.
If it is the clunky and time-consuming implementation of these standards that makes them so unappealing, that no longer needs to be a concern. Make use of existing technology to not only make using these systems easier but to also streamline the review and analysis process. Your clients will appreciate it. With more time to focus on billable tasks, you’ll appreciate it too.