5 Ways to Put More Predictability Into Your Legal Budget
While achieving a predictable legal budget is a noble pursuit, it isn’t always an easy one. So what are the steps that will help you to reach an accurate and predictable legal budget for the present and future?
Looking Back: Benchmark Your Historical Trends
It’s hard to spot the pattern until you see the past. Confirming what has happened is the first step toward accurately predicting what will happen. And analyzing this historical data will greatly help when making more informed budgeting decisions. Now that you know you need to benchmark your historical trends, it’s time to figure out which insights you should be looking for. Quantitative data, such as how much of your budget was spent per matter and per matter phase last year, can help you to accurately predict your future budgets. When conducting this analysis you could find, for example, that it makes more sense to settle when forecasting large-scale litigations because you notice you’ve spent a lot of money previously and it’s likely you’ll spend even more if you don’t settle in the future. Other metrics you should evaluate include which of your law firms you spent the most with last year.
Another important thing to remember is your accruals as including the legal work for which you have yet to be billed in your reports can affect the overall accuracy of your budget forecasting. Ultimately, having this level of visibility will provide you with more predictability and accuracy. And with all of this information to hand, you can predict when certain issues or spikes in your spend are likely to arise more easily.
Getting Ready: Gather Your Business Requirements
Once you’ve gathered the relevant legal spend data, it’s time to launch your requirements gathering stage for another predictability boost. But don’t just stay within the confines of the legal department to collect your insights for a predictable legal budget. Syncing up with other departments within the business to investigate their requirements and strategies will also offer more predictability and accuracy.
Here are some examples of the information you should be looking to find out:
- When will your HR team recurrently require hiring paperwork?
- Will your sales team need additional trademark defense due to their upcoming expansion into other territories?
- What is the level of complexity of the work those departments are likely to need and when?
- What other business goods and services could affect or even take up a portion of your legal budget for the year?
Once you are aware of these requirements, you’re more likely to know when you’ll need to reevaluate your own legal budget.
Enforcement: Stick to Your Plan
An important but sometimes overlooked necessity for a predictable (and trackable) legal budget is clear billing guideline enforcement for your law firms to adhere to. Because your billing guidelines state what type of work you shouldn’t be billed for, your law firms will know exactly what not to charge so they won’t be surprised when you point out any possible violations. This allows you to easily predict the potential savings you could achieve. Billing guideline enforcement will also help to improve the relationships you have with your law firms as they will be familiar with your rules, adding another layer of predictability for them as well as you.
Fundamentally, the work you’ve done up to this point may only get you to 75% or 85% predictability, but the power is in your hands when it comes to being 100% sure that wasteful and non-compliant expenses don’t make it into your legal spend.
Ongoing: Making Adjustments and Refinements
The historical trends you’ve gathered can be used to determine if any adjustments or refinements need to be made. This should be done on an ongoing basis per matter as it’s possible that unforeseen changes (and challenges) will arise throughout. For example, you may discover that something went over budget and needs to be reevaluated. If demand for that matter type or practice area is expected to stay high, it might be time to start some discussions with your law firms about introducing alternative pricing structures or fee arrangements, depending on your team and overall business requirements.
Feedback for the Future: Creating Continuous Improvement
Hopefully you now have more confidence in your 2020 forecasts. But one thing you can definitely control is setting up good spend tracking systems so next year you have even better data to forecast from. Just make sure you set alerts in case you have any budget overruns so you can act quickly. The most important thing to remember is to ensure a continuously improving cycle with progressively deeper data. The insights you gather from that data now will be an asset you’ll be happy to have when you’re carrying out a benchmarking exercise a year from today.
Find out how AccuWeather returned 20% cost savings thanks to detailed data using a dedicated legal spend management tool.