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Invoices

Include Deductions and Credits in Invoices

Your firm may have an agreement with a client to provide certain discounts in invoices or you may need to include a credit in an invoice. The topics below provide useful information about discounts and credits for both LEDES and non-LEDES invoices.

Discounts

LEDES Invoices
Clients have many different types of billing arrangements with firms. Some of the types of billing arrangements include:
  • Discount to standard hourly rates
  • Blended hourly rate
  • Fixed or flat fee
  • Capped fee
  • Retainer arrangements
  • Pre-payments
  • Volume discounts
The LEDES specification does not provide detailed instructions on how to show these types of fee arrangements in your invoice. In all of these discount arrangements, your client would prefer that you generate your LEDES invoice in the following manner:
  1. The fee and expense line item entries should be for the gross amount at your firm's standard hourly rates.
  2. An invoice level adjustment should be entered to the fees or expenses (as appropriate) so that the total amount of the invoice (including the invoice level adjustment) is the proper amount of the invoice. For example, if the total hourly fees of your invoice is $10,000 but you have an arrangement with your client for a monthly capped fee of $8,000, then you should include an invoice level adjustment to fees in the amount of $2,000. The LEDES 1998B specification includes the following instructions for making an invoice level adjustment:
    Invoice-level adjustments must be entered as a line item with the EXP/FEE/INV_ADJ_TYPE indicating either an invoice-level adjustment to fees ("IF") or an invoice-level adjustment to expenses ("IE") and the value for the adjustment entered in the LINE_ITEM_ADJUSTMENT_AMOUNT field. Thus, an invoice-level adjustment of -$2000 on fees (i.e., an invoice-level discount on fees) would have the following field values (among others):
    Field Name
    Field Value
    EXP/FEE/INV_ADJ_TYPE
    "IF"
    LINE_ITEM_ADJUSTMENT_AMOUNT
    "-2000"
    LINE_ITEM_TOTAL
    "-2000"
  3. The line-item narrative should include a description of the discount. For example, "This discount reduces the total invoice amount to our agreed upon monthly capped fee for the matter, which is $8,000".
    Your client would prefer this method over other methods because it is easier for them to then calculate cumulative totals of deductions across all invoices.
non-LEDES invoices
The electronic version of your invoice should show the total amount of the discounts that were included in your invoice. The amount of the discounts should be allocated appropriately between fees and expenses. For example, you have an arrangement with your client in which you agree to provide a 10% discount for all fees. The total amount of the fees for your invoice is $10,000. The amount of the discount that should show in your invoice is -$1,000. A comment describing that the invoice includes a discount to fees of $1,000 with an explanation of the reason for the discount should also be added.

Credits

LEDES 1998 invoices
The LEDES standard recommends entering the credit amount as an invoice level adjustment to fees or expenses (whichever is appropriate). The LEDES 1998B specification includes the following instructions:
Invoice level adjustments must be entered as a line item with the EXP/FEE/INV_ADJ_TYPE indicating either an invoice level adjustment to fees ("IF") or an invoice level adjustment to expenses ("IE"), and the value for the adjustment entered in the LINE_ITEM_ADJUSTMENT_AMOUNT field. For example, an invoice level adjustment of -$4000 on fees (an invoice level credit on fees) would have the following field values (among others):
Field Name
Field Value
EXP/FEE/INV_ADJ_TYPE
"IF"
LINE_ITEM_ADJUSTMENT_AMOUNT
"-4000"
LINE_ITEM_TOTAL
"-4000"
In addition, the line-item narrative should include a description of the credit.
non-LEDES invoices
The electronic version of your invoice should show the amount of the credits that were included in your invoice. The amount of the credit should be allocated appropriately between fees and expenses. For example, if the amount of the credit is $1,000 in fees and $500 in expenses the amount you credit in your invoice should be distributed -$1,000 to fees and -$500 to expenses.
The amount you enter for your fees and expenses in Tracker should net the amount of the credit contained in your invoice. For example, your regular invoice has $10,000 of fees and $1,500 of expenses. In the invoice, you included a $1,500 credit (of which $1,000 is credited to fees and $500 is credited to expenses). The amount you should enter in Tracker is $9,000 of fees and $1,000 of expenses. You should also add a comment describing that the invoice includes a credit of $1,500 with an explanation of the reason for the credit.

This article applies to:

  • Product: Legal Tracker
  • Subject: Invoices
  • Audiences: Firm