What is Legal Spend Management?
Legal Spend Management
Legal spend management is the practice of controlling outside counsel spend. Management of outside counsel spend involves having visibility of spend, identifying and actioning cost-reduction opportunities, and budgeting future spend.
Specialised legal e-billing is necessary for spend management
A typical legal team will receive thousands of invoices a year. Reviewing these invoices manually is time-consuming and prone to error. The first stage in legal spend management is to automate the review of legal invoices, a process known as e-billing. Legal e-billing differs from a generic accounts payable (AP) system in a few ways and is essential for legal spend management:
- Different billing guidelines – what firms can and cannot invoice for – exist for different firms. Trying to remember and accurately apply these rules when manually reviewing invoices is a daunting task and mistakes will slip through the net, resulting in overpayment. Legal e-billing systems allow the corporate legal team to set up rules and incoming invoices are automatically reviewed and approval, rejected, or flagged for further review.
- A legal invoice can contain hundreds of line items for different work and task codes. A standard AP system cannot track these effectively. An e-billing system allows law firms to submit LEDES format invoices, which enables the management and reporting of these task codes allows the legal team to analyse the costs of different work types, compare value across firms, and budget headcount and spend required for future work.
- Some legal e-billing tools allow law firms to submit their work in progress with the corporate legal team reviewing or rejecting the work the firm wants to bill. This means invoices are theoretically approved before they are formally submitted which removes unexpected invoice amounts, reduces the number of rejected invoices, and speeds up payment to the firm.
- Most legal spend management tools also contain legal matter management features, which would not exist in an AP system. The matter data gives a fuller picture of legal work and its associated cost.
E-billing systems integrate with accounts payable solutions, if desired, so the organisation’s accounting processes can still be followed and the legal team gains the additional level of visibility and control to allow them to manage legal spend effectively.
Legal spend management software beyond e-billing
While legal e-billing reduces costs quickly by enforcing billing guidelines and increasing team productivity, full legal spend management goes further than this. As law firms become better at submitting compliant invoices, the savings from guideline compliance start to stablise. This tends to happen 1-2 years after implementation. At this point, legal operations will start to use the accumulated matter spend data to make more strategic spend management decisions, though this can be done earlier on in the spend management journey. Legal spend management software enables legal operations to report on legal spend and use spend data to make sourcing decisions, drive negotiations and selection, and create collaborative, value-driven relationship with firms. Features of legal spend management software, besides e-billing, include spend dashboards and reports, RFP tools and legal analytics capabilities.
Benefits of legal spend management software
Return on investment (ROI) is very easy to prove with legal spend management, as most of the benefits are directly related to lowering costs. These benefits include:
- Significantly reduce legal spend. A fairly typical legal department can save 455 EUR in the first year of spend management use. Download our business case guide to calculate your potential savings.
- Speed up invoice processing time and take advantage of early pay discounts from firms.
- Visibility of work in progress and accumulating costs, no need to wait for the invoice.
- Track and report on matter budgets, improving accuracy of forecasts over time.
- Improve visibility into matters and their associated costs through real-time dashboards and automated reports to stakeholders.
- Automate manual processes to improve team productivity and free counsel up to concentrate on high-value work.
- Accurate, consistent, comparable and reliable data across all matters.
- Improved collaboration internally and with outside counsel that drives better matter outcomes and higher quality firm relationships.
- Make data-driven strategic legal operations and management. decisions, including sourcing, panel reviews, and negotiations.
- Like for like comparison and review of law firm rates and value for money.
- Fairer, competitive and comparable proposals from firms
Legal Spend Management software
See how easy it is for yourself. Request a demo of BusyLamp legal matter & spend management software.