Why Legal Departments Need Spend Management
Smaller legal departments feel this even more acutely. They have fewer resources at their disposal and yet are expected to meet the needs of the business all the same. They have to deliver advice with a small pool of lawyers and have limited budgets for outsourcing work to external firms.
In a small department the General Counsel has to balance using external law firms effectively and efficiently, while also ensuring the management and administration of these firm relationships does not burden their in-house team and limit them even further.
The challenge of outside counsel management for small departments
Managing, reviewing and administering outside counsel invoices is time consuming. A review of a standard law firm invoice takes on average 90 minutes. An average sized department will receive 15-20 of these a month. That means 3-4 days a month of a single lawyer’s time in total. For a small department, that is a serious burden.
In addition, smaller legal departments lack the market context and buying power of large legal departments. They often don’t know the norms and appropriate charges in particular practice areas. How could they? They only see a certain number of matters a year. A larger department will have a long history of hundreds or thousands of matters to know what they should be paying, and also have much more clout when it comes to negotiations as a result of their size.
How can technology help?
Smart use of technology can help both these challenges for a small department.
Language analysis software like Brightflag automates the review process by reading and reviewing law firm invoice narratives. It reads and categorizes lines on an invoice, and automatically flags if there are inefficiencies or guideline breaches in the work done. Instead of 3-4 days a month spent on this review process, it is now reduced to only half a day. That is a lot of extra time for in-house lawyers to spend on actually helping to drive the business forward.
In addition, analytics can overcome the lack of context problem, by providing smaller departments the same data and context around engagements that previously was only available to very large legal functions. The platform also automates legal spend reporting and forecasting. This means the GC can deliver reports to finance and management at the push of a button without having to manually collate spend data from multiple sources.
The business case for spend management software
Legal spend management software brings an immediate ROI. Independent reports have already shown that software and processes in this space can bring significant savings. At Brightflag, our customers see over 12% savings on external spend in the first year. Very few software initiatives can bring such a compelling return in such a short period of time. As a result, we are working with many small legal departments in leveraging their limited resources with technology, and ensuring they can continue to support their business colleagues in driving the business forward.
Take a look at our Webinar to find out more about how legal teams control spend: