7 Reasons to Prioritize a Legal Spend Management System

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.

In many cases, the form that innovation takes is a larger investment in legal tech. But with so many options on the table, many legal leaders don’t know where to start — especially given the pressure to demonstrate immediate ROI from new tech investments.

In this blog, we present seven reasons why legal spend management systems should be at the top of your tech investment list.

The Importance of Legal Spend Management Systems for Legal Departments

First, a quick refresher on why legal spend management systems are vital for modern in-house legal teams.

It aligns legal strategy with in-house goals: By implementing spend management strategies, legal teams can directly connect their budget decisions to overarching business objectives. For example, ensuring efficient resourcing when the business aims to reduce overall costs. This positions the law department as a true partner to the business.

It provides better visibility into legal spend and work: Good spend management tools give corporate legal teams clear-cut insights into where their budget is going and how work has been allocated across the team. That makes it much easier to make smart, informed decisions about how to manage spend.

It maximizes the value of outside counsel: Spend management tools are also a game-changer when it comes to analyzing how outside counsel is delivering against the legal team’s expectations. Are firms complying with billing guidelines? Are senior lawyers handling routine tasks? Answering questions like these paves the way for stronger outside counsel relationships and can help your team negotiate better rates.

Alright, that’s the background. Now let’s run through the in-depth reasons why a legal spend management solution should be your team’s top tech priority.

Reason 1: It Enables Teams to Speak the Language of the C‑Suite

Money is the native language of the C-suite. And without sufficient fluency, in-house legal leaders will consistently struggle to establish credibility with executives.

Legal spend management solutions close this gap by describing legal spend in terms (and metrics) the C-suite can appreciate.

Advanced reporting tools also help you to quickly capitalize on spend data to reveal answers to the most pressing budget questions, like:

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

The result is that legal leadership can spend more time advising on cost projection, budget adherence, and value assessment — and thereby become equal contributors to their company’s most strategic conversations.

Reason 2: Building a Business Case is Easy

When it comes to legal spend management systems, it’s easy to get buy-in. You’ll still need to make a sound business case to executives, but spend management tools make that much easier by providing four clear-cut sources of ROI you can point to:

• Operational Visibility: Spend management tools help teams to increase their legal ops visibility by providing a single source of truth. A robust spend management system enables you to answer accounting questions and formulate strategic plans for working within your budget. It also provides clear-cut evidence of where your team can improve or needs more support (and that can help motivate for future legal tech purchases).
• Team Productivity: Modern legal spend management systems eliminate many of the tedious tasks that eat up your team’s time. Tasks like reviewing invoices and reporting spend become a fractional percentage of your departmental workload. This leaves lawyers free to focus on high-impact legal work, and improves legal service delivery to the rest of the company.
• Cost Control: Legal spend tools enable more precise budgeting and forecasting. They also allow your team to keep a much better track of where budget discrepancies are arising: whether that’s poor billing guideline adherence or opportunities to consolidate work and benefit from fixed-fee arrangements.
• Outside Counsel Alignment: Finally, with in-house spend management, you’ll instantly be able to create a more effective feedback loop with outside counsel and flag instances where work did not match expectations. As you continue to record data on the quality of engagements, you’ll build benchmarks to drive stronger law firm selection, fee negotiation, and resourcing decisions.

All of this means that by investing in spend management, you’ll not only be able to recoup the cost of your investment quickly, but you’ll also be able to prove it in the terms that make most sense to the C-suite.

Reason 3: It Strengthens the Finance Partnership

Legal spend management systems also strengthen the GC/CFO relationship. By consolidating all matter, invoice, and vendor information into a single platform, spend management software immediately closes potential reporting gaps and creates a unified line of sight. This means that legal can present a single trusted view to finance and more easily motivate or explain budgeting decisions.

Over time, these benefits compound. As historical data accumulates on the platform, in-house teams gain the granular context they need to negotiate discounted rates, set precise budgets, and employ fixed-fee arrangements.

All of this empowers legal leadership to be more accurate and more proactive in managing the budget. That in turn makes it easier for the finance team to manage their own planning, and it often strengthens the partnership between CFOs and GCs as a result.

Reason 4: It Takes the Unpredictability Out of Legal Spend

Legal spend management solutions provide you with several protective layers to help you weather unexpected scenarios. For one, having a digitized financial hub that 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 visibility becomes a genuine asset whenever you need to answer questions like:

• “Which departments are driving a disproportionate amount of spend?”
• “Which law firms are the most valuable business partners?”
• “Where could we bring work in-house?”

By having that information on hand, you can tailor spend management strategies to improve both the resilience and predictability of your budget.

Reason 5: Make Legal Work More Efficient

One trend that persists across all economic cycles is the seemingly insurmountable workloads managed by in-house lawyers.

Legal tech of every type offers attorneys at least one reliable antidote: efficiency. By eliminating, automating, or accelerating the components of formerly manual workflows, in-house spend management tools can reduce administrative burdens, freeing up 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. And more time focused on high-value, strategic work.

Reason 6: It Maximizes Value from Outside Counsel

Outside counsel services are often one of the largest cost categories within corporate legal departments. Despite this, most teams still lack the data transparency they need to determine objectively:

1. How well each outside counsel partner is performing, and
2. How could they transform outside counsel partnerships to improve the value they get from these engagements

Instead, decisions are often made based on subjective assessments or legacy relationships.

Legal spend management solutions shed light on the true nature and value of outside counsel services, and turn the subjective into the objective.

For example, invoices can be automatically deconstructed and translated into a series of data-based reports, covering everything from task and timekeeper breakdowns to budget compliance and benchmark price ratings.

This allows your legal team to provide clear examples of what you’d like to see improved. Meanwhile, the law firms themselves are incentivized to improve their performance, knowing that their progress will be recognized and potentially rewarded with expanded engagements.

Reason 7: Provides Faster Insights and Better Reporting

The latest spend management platforms utilize tools like GenAI to improve efficiency and give teams faster insights into their spend (and how to improve).

Ask Brightflag, for example, is a generative AI legal tool that lets users request information with a simple text prompt. Instead of spending time navigating reporting menus or manually tweaking filters to get the data they need, legal teams can simply ask the AI assistant for what they need, and get a response in seconds.

How to Navigate the Path to Effective Legal Spend Management

Ultimately, each legal team will have their own spend management strategies and priorities. But that doesn’t mean you need to follow a haphazard course in implementing a solution. The first step to realizing the benefits listed above is to evaluate potential legal spend management solutions and pick the one best suited to your team.

How do you choose? Legal spend management works best when you roll out the various tools available logically and consistently. So look for a platform that starts with foundational elements and then builds towards more advanced functionality, as illustrated below.

Conclusion

Need help evaluating your legal spend? Brightflag is a trusted enterprise legal spend management system that simplifies every aspect of spend: from budgeting and forecasting to managing outside counsel and automated application of your outside counsel guidelines.

Schedule a demo to learn more and take the first step towards proactive spend management.

Legal Spend Management System FAQs

How Can Legal Spend Management Systems Improve Relationships with Outside Counsel?

Legal spend management solutions give your team a way to accurately monitor outside counsel performance, including factors such as task, timekeeper breakdowns, and billing guideline adherence. This allows you to see where improvements can be made and negotiate more favourable performance and bulk work rates with external teams.

What Tools or Software Are Used for Legal Spend Management?

Tools such as AI-driven legal e-billing, analytics, and a centralized data and document repository are all vital components of successful spend management. For most teams, the best option is to invest in a platform that combines all these tools in one offering, providing a full-service, transparent view of the company’s overall legal spend landscape.

What Are the Key Challenges in Implementing Legal Spend Management Systems?

The major challenge most teams face is when they implement individual spend management tools or strategies without a clear understanding of how these work together as part of the broader picture. This can lead to a disjointed tech stack that ultimately fails to deliver on the promise of spend management — better, more transparent spend and budgeting. A more effective approach is to invest in a comprehensive solution that integrates tools and data within a single, unified platform.

What Metrics Should Be Tracked in Legal Spend Management Systems?

There is a wide range of potential metrics to track, but typically, you want to focus on metrics that explain performance, as this directly impacts cost. Three of the most important metrics are:

• Matter risk and complexity (to understand time and cost expenditure)
• Outside counsel guideline compliance
• Spend-to-budget