7 Reasons to Make Legal Spend Management Your Top Priority

More corporate legal leaders are arriving at an inevitable conclusion. With budget and headcount trending in the opposite direction of steadily increasing workloads, innovation is the only way to balance the equation within their departments.

This realization is expected to fuel a threefold increase in legal tech investment between 2020 and 2025. But the pressure to demonstrate positive ROI will surely rise at similar rates for those sponsoring new initiatives.

So where should you focus first when prioritizing your legal tech transformation? The logical answer is to start with spend.

Speak the language of business leaders

Money is the native language of the C-suite. Without sufficient fluency, in-house legal leaders will always struggle to build credibility with executives and become equal contributors to their company’s most strategic conversations.

Legal spend management software closes this gap by describing the nature of outside counsel costs in terms the C-suite can appreciate. Every expenditure is automatically captured and categorized in a central record for easy reference and complete accountability. Advanced reporting tools help you capitalize on that data, quickly revealing answers to the most pressing money questions.

The result is less time searching for figures and more time advising on cost projection, budget adherence, and value assessment.

Overheard in the C-suite

• “What did we fail to account for last quarter and why?”
• “How are we pacing against our fiscal year budget?”
• “What’s driving the majority of legal spend?”
• “Which law firms are most cost-effective?”
• “Which matters are at risk of overrun?”

Present a persuasive case

Money is the language of business, so one natural advantage of spend management initiatives is they resonate with the C-suite. Nevertheless, you’ll need a sound business case to secure buy-in for any legal tech purchase.

Spend management software makes it easy for executives to get on board by offering four proven sources of ROI that you can point to:

• Operational Visibility. No more gaps, blanks, exceptions, or surprises. You’ll be able to answer accounting questions and formulate strategic plans by referencing a single source of truth.
• Team Productivity. Modernizing the process of legal spend management saves more time for the practice of legal service delivery. Tedious admin tasks like reviewing invoices and reporting expenses become a fractional percentage of your departmental workload. This leaves lawyers free to operate at the top of their license.
• Cost Control. Move beyond the myth that legal spend cannot be predicted or controlled. You’ll start narrowing the range of potential financial outcomes by employing an increasingly precise toolset. This ranges from billing guideline updates and legal budgeting to detailed accruals reports and fixed-fee arrangements.
• Outside Counsel Alignment. The same data-driven approach that guides internal discussions also enriches outside counsel engagements. You’ll instantly create a more effective feedback loop, flagging instances where actions did not match expectations. This enables underlying confusion to be quickly resolved. As you continue recording performance ratings you’ll build benchmarks to drive law firm selection, fee negotiation, and resourcing decisions.

Improvements across these four axes routinely add up to customers recouping their legal spend management software subscription cost within three to six months.

Make an ally in the CFO’s office

Unforeseen demand drivers. Unpredictable project scopes. Uncompromising service standards. CFOs can certainly appreciate some of the unique challenges a GC faces in managing their department’s expenses. But that doesn’t exempt in-house legal teams from the same obligations and expectations as their business counterparts.

Legal e-billing software removes much of the friction from these relationships by advancing accountability, efficiency, and predictability by several degrees. The initial innovation of pulling every matter, invoice, and vendor onto the same platform immediately closes potential reporting gaps and creates a single line of sight. Legal can present one trusted view to Finance — without caveats or exceptions.

In addition to capturing and categorizing past transactions, legal spend management software also gives you greater control over how much the next one may cost. As more historical data accumulates on the platform, in-house teams gain more of the granular context they need to negotiate discounted rates, set precise budgets, and employ fixed-fee arrangements. Intelligent invoice review tools can then reinforce those upfront controls by quickly flagging potentially non-compliant expenses and only routing approved submissions to Accounts Payable.

Finally, legal spend management software helps Finance see around corners by establishing effective monthly accruals processes and providing up-to-the-minute updates on fiscal year forecasts. And it’s often this last, future-focused layer of visibility that inspires CFOs to see their GCs in a new light.

Insulate against economic uncertainty

From public health crises to supply chain disruptions, one doesn’t need to look far for recent reminders of how quickly unanticipated events can shift macroeconomic conditions. And whenever fear, uncertainty, and doubt take root in the market, all the corporate financial scrutiny discussed in previous sections multiplies significantly.

Legal spend management software hands you several protective layers to help weather such scenarios. For one, having a digitized financial hub your teams can access from anywhere immediately increases the resilience of your operations. The standardized and increasingly automated workflows it facilitates also limit the risk of error or delay when unexpected pressures are applied to everyday tasks.

This continuity of visibility becomes a genuine asset whenever you need to respond to changing market realities with difficult strategic decisions.

• “Which departments are driving a disproportionate amount of spend?”
• “Which law firms are the most valuable business partners?”
• “Where could we insource a certain category of work?”

Without a detailed and data-based financial portrait to present, corporate legal leaders risk ceding influence in how their companies choose to resolve such debates. By contrast, a modern spend management system puts you in a position to confidently direct and defend the strategies that will steer your team through tough times.

Guard against in-house burnout

One trend that persists across all economic cycles is the seemingly insurmountable workloads managed by in-house lawyers. What is changing, however, is the growing recognition of the personal and professional consequences of employee burnout.

Legal tech of every type offers attorneys at least one reliable antidote: efficiency. By eliminating, automating, or accelerating the components of formerly manual workflows, smart software can reduce administrative burdens and reserve more time for strategic priorities. In the case of legal spend management, that means significantly less time spent collecting accruals, reviewing invoices, and updating forecasts.

But in the battle against burnout, visibility may actually be the best defense. Once you develop a granular view of every matter assigned and service billed, you can more clearly assess whether the right people are being tasked with the right work. And this ongoing exercise of recalibrating resourcing plans has the potential to dramatically shift a lawyer’s day-to-day outlook.

With more time available for meaningful and motivating work — and that work more closely aligned to each individual’s unique skills, you’ll have a sustainable recipe for employee satisfaction.

Maximize outside counsel value

Outside counsel services tend to represent the largest cost category within most corporate legal departments. Demand for such services also invariably increases as companies grow and success brings new complexities. As a result, even modest improvements to these working relationships can have an outsized impact on financial and strategic outcomes. Yet most in-house teams still lack the essential ingredient for transforming outside counsel engagements: transparency.

Legal spend management software sheds light on the true nature and value of outside counsel services by turning the subjective into the objective. Invoice narratives are automatically deconstructed and translated into a series of data-based reports on everything from task and timekeeper breakdowns to budget compliance and benchmark price ratings. Law firm scorecarding features also help establish performance metrics around even the most qualitative attributes, like responsiveness and quality of advice.

This enhanced visibility establishes a virtuous cycle. Law firms sense the cultural shift toward increased accountability and reexamine their approach. You gain data to provide clear examples of what you’d like to see improve. Law firms are motivated to make ongoing adjustments, knowing their progress will be recognized and potentially rewarded with expanded engagements.

Objective. Efficient. Value-driven. Both sides want these to be the traits that define the partnership. But this new model won’t be unlocked with old tools.

Realize results fast

Solving legal spend management is a foundational legal ops milestone that has far-reaching and long-lasting advantages. But that doesn’t mean you have to wait years, or even quarters, before realizing returns on your investment.

Technology implementation horror stories are being challenged by an emerging class of customer-centric software providers. This makes spend management initiatives less complex than you might expect. In fact, most first-time buyers can get up and running within 30 days.

This compressed timeline minimizes the risk of disappointing stakeholders with delayed results. On the contrary, it gives you an opportunity to bolster credibility and gain valuable political capital by quickly delivering a high-profile win.

The path to progress

Much like the adoption of legal tech solutions, the innovation of legal spend management works best when you follow a specific sequence. A few foundational elements have to be installed first before you can expect to find success with future additions. The good news is that all the hallmarks of a sustainable solution can be built in a matter of months.