LEDES API Effort To Address Serious Ebilling Issues

As many are aware, I have led the LEDES Oversight Committee (“LOC”) for many years now. We have a project underway that could solve some significant law firm ebilling problems and I would like to use this forum to spread the word.

Let’s talk about the problems. 

A law firm’s time and billing software is set up to capture the date an invoice (i.e., a paper bill) was generated. But with ebilling, that is only the first step. The biller must then create a LEDES invoice file, and then log into the client’s ebilling system, upload and submit the invoice and attachments, and then wait for information on whether the invoice has passed electronic validation or not. Typically, this happens in a relatively short period of time from when the paper bill was generated. But if the invoice is rejected during electronic validation, there can be a cycle of correction/resubmission until the invoice is accepted by the system. Once accepted, the bill reviewer can also reject the invoice, which starts off another cycle of correction/resubmission until the invoice is finally approved for payment.  

In ebilling, the date an invoice is accepted is equal to the date the paper bill is generated but there can be a delta if the invoice has been rejected and requires correction/resubmission. Since time and billing software is totally disconnected from ebilling, it does not pick up information on when an invoice has been accepted by the ebilling system, nor does it provide information on invoice status, particularly on rejections that need correction.

To compound the situation, most clients have rules specifying the maximum number of days to submit services and expenses for payment. This means that an entire invoice can be rejected if the invoice end date exceeds the specified time period, or individual time or expenses can be rejected based on aging. With no recourse for getting paid, the law firm must write off the time and expenses. 

As if that wasn’t bad enough, Law Firm collection software uses the date the paper bill was created for collection action on overdue invoices. Billers must check whether the client is an ebilling client and, if so, follow up on the invoice status prior to taking any collection action. In many cases this is the point where the law firm learns that a rejected invoice has not been corrected/resubmitted and may have exceeded the client’s submission criteria.

When I say these are big issues for law firms, I mean BIG!

So now let’s talk about how the LOC is working on something that could solve these issues. 

We started an effort led by Nick Puschak a couple years ago to create an API to allow for system-to-system transmission of ebilling invoices and provides calls for updates on invoice status. The first version of the API was released in 2020 and can be found here: LEDES API – LEDES.org. 

Nick started version 2 discussions earlier this year with the intention of dramatically expanding the scope of tasks that the API can handle. 

With respect to invoice status, the calls proposed in v.2 at this time will identify: 

  • received:  Receiving system has simply received the Invoice, however no file error processing or other actions have occurred at this time. The invoice will stay in this state until the file error checking has been completed.
  • file_error:  There are errors in understanding the invoice data. The invoiceErrors array should list the errors. If no file errors are found then the status should be set to one of the following statuses, which will imply that the invoice data was understood. Even though there may be no file errors found, this does not mean there are no errors in the invoice and it still may be rejected due to some automated audit checks or manual checks by a user.
  • pending_client:  The receiving system understands the invoice and it is pending review or future action by the client.
  • pending_tax_authority:  The receiving system understands the invoice and it is pending approval from the tax authority, when that is required.
  • pending_vendor:  The receiving system understands the invoice and the invoice is awaiting a response for some action from the Vendor. For example, if the client needs a receipt attachment to be submitted. 
  • delivered_to_client:  The receiving system has delivered the invoice to the client system. This optional status can be used when the invoices is passed to a separate client system.
  • rejected:  The receiving system has rejected the invoice with errors. The invoiceErrors array should list the errors.
  • approved:  The invoice was approved by the receiving system or by users and its awaiting payment.
  • sent_to_ap:  The invoice was sent to an Accounts Payable system.
  • paid:  The invoice was paid. The invoicePayment array should list any payment data. On some systems the receiving system may not receive payment data or even a paid status.

Think about it. It will be possible to either support an additional field or update the paper bill create date to reference the date the invoice has been accepted by the ebilling system and a new Ebill Invoice Status field can be updated to provide information on ebill status. Think about the potential of having a report showing invoices with Rejected status that need correction/resubmission! 

What I envision requires a commitment on the part of the time and billing vendors and the ebilling vendors to add this functionality. My hope with this post alerts these vendor communities to the API effort, that they consider joining the LOC to participate in the API development, and they look for the release of the API v.2 so that API support and associated updates within their systems can be immediately rolled out to their customers. 

(This post was also shared on LinkedIn.)  

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