Many organizations find that having outside counsel provide an template for in-house attorneys to use can make it easier for everyone involved to collaborate on projects to optimize costs. In this guide on Legal Spend Management, we will cover how to create these systems from scratch and how to keep them up-to-date overtime to make sure you’re maximizing savings opportunities every single month.
What Is Legal Spend Management?
A more precise definition would be a set of systems, people, and strategies for tracking, analyzing, and optimizing costs incurred by your in-house legal departments and their outside counsel. The focus of Legal Spend Management is making sure your dollars are allocated as efficiently as possible to provide value to your business. It’s not just about cost savings it also means allocating funds where they will give you maximum return on investment. While there are myriad ways to tackle legal spend management, here are some basic questions that should serve as a starting point How do we track our total spend Where can we find untapped resources and new lawyers.
At a high level, legal spend management is quite straightforward define your goals track expenses establish benchmark standards, compare them against actual performance make adjustments and improvements to meet these standards going forward. To do so requires an understanding of how your legal department operates and a clear definition of success metrics. The next step is to establish a Legal Spend Management system. This will include tracking and analyzing your legal expenses, as well as developing strategies for managing outside counsel and finding opportunities to optimize your resources. Here are some of the basic features you’ll want to incorporate into your legal spending strategy
What Are Some Types Of Spend Management Software?
The reality is that there are multiple types of Legal Spend Management software on the market today. These vary in functionality, cost, and ease of use. You might be most familiar with expenditure tracking software like Concur or Expensify which focus on tracking small business expenses by integrating with banking and credit card accounts. But these aren’t your only options. Some firms use proprietary applications to track legal costs while others use accounting systems to automate their accounting processes depending on your firm’s financial structure and needs, one option may be better than another for you.
The process of tracking and managing your legal expenses can be overwhelming without proper software in place. These tools also help you monitor spending habits and trends, which can help with deciding on whether or not to re-negotiate rates with a vendor or determine if there’s enough wiggle room in your budget to take on another project. At first glance, it may seem like an additional cost and a tedious task to manually input expense information. However, Legal Spend Management software is designed for ease of use most trackers automate repetitive tasks, for example by automatically linking to bank accounts and credit cards or importing vendor invoices electronically via email.
Getting The Most Out Of Your Spend Management Efforts
You’ve implemented Legal Spend Management, in your organization and are now ready to get some benefit from it. But how do you measure success? A good way to gauge LSM’s effectiveness is by tracking metrics such as cost per matter and overall legal spending. These data points will help you manage costs more efficiently going forward. However, legal spend management is also intended to improve collaboration between in-house and outside Intelligent Spend Management counsel, so monitoring things like communication metrics can also provide insight into whether your efforts are paying off. One of the simplest ways to track these kinds of metrics is through a basic spreadsheet Sheets make a great resource for free form tracking and analysis like that.
An important part of managing your spending is keeping track of where your legal dollars are going. For example, what percentage of your legal expenses goes toward litigation? To keep track of these numbers, you can build a simple spreadsheet that breaks down your overall legal expenses by each matter type. You can also compare monthly versus annual averages to see how spending varies throughout different times of year in some industries, certain months are busier than others. In addition to keeping track of where your money is going, Legal Spend Management can help you and your outside counsel work more closely together.