According to a report by the Association of Corporate Counsel, the average legal spend among companies increased by 29 percent in 2023 compared to 2022. To try and regulate the wild spike in costs, businesses must incorporate a solid legal spend management plan.
Ideally, legal spend management includes the practices of reviewing, tracking, scrutinizing, and reporting expenses in the company’s law department. This practice aims to increase transparency and efficiency and identify opportunities to lower operational costs.
If you are looking to optimize your business’s legal spend management, here are tips to help you get started.
Implement a Centralized Spend Tracking
One way to get started with a legal spend management program is to create a single repository that captures all the company’s legal spending. A centralized spend tracking system stores all your invoices, budgets, and matters in a unified repository, making tracking where your money goes easier.
When creating a centralized spend tracking system, include a vendor portal where all your legal service providers can submit their invoices and any other financial information. The repository should also have a real-time update feature, enabling the organization to track any illegal expenditure promptly.
Moreover, an excellent spend-tracking system should have role-based access control. That maintains integrity and ensures only authorized people can edit or delete legal spending data.
Budget at Every Level of Your Legal Spend
An ideal legal spend management plan should track budgets at all levels, including matter, practice, and overall department levels. Unfortunately, many companies find it hard to implement robust level-based tracking because they lack a way to organize financial information properly.
The good news is that you don’t have to organize all your documents manually. Various easy-to-use software solutions and tools are available to simplify your work.
Legal spend management software provides any level-based information you need in a split second. It also makes it easier to spot anomalies in your expenditure and take corrective action.
Establish Clear Objectives
Whether it’s achieving total visibility into legal spend or cutting costs by a certain percentage, having clear objectives is crucial to your company’s legal spend management. Objectives are a roadmap, serving as the guiding tool in all your actions and decisions.
Once you have clear objectives, it would be best to present them to all stakeholders for insights and collaboration. These stakeholders could include everyone from the IT and finance department, external vendors, and the general in-house counsel.
Significantly, be flexible in your objectives and allow room for suggestions and changes in the legal realm. It would help to visit your goals occasionally and make data-driven adjustments, ensuring your LSM strategy remains relevant.
Work with Legal Service Providers
No man is an island when looking to implement a successful legal spend management system. Therefore, consider linking your in-house experts with other reputable legal service providers outside the company.
When collaborating with other legal service providers, establish open communication lines through email updates, meetings, or any other secure platform. Clear communication is vital when discussing reports, billing, and defining the company’s expectations.
Moreover, collaboration should be a two-way thing. It would be best to encourage your outside legal service providers to give feedback, which is crucial to identifying areas that need improvement in your relationship.
Review and Make Changes Regularly
A legal spend management strategy is not a once-in-a-lifetime thing but a continuous project that needs regular monitoring and adjustments. However, reviews should be done according to the company’s objectives and outcomes.
Reviewing an LSM plan should go beyond financial metrics to include other essential details such as vendor performance, billing data, and input from in-house and outside legal teams. Having a comprehensive review gives you a well-rounded report of your legal expenditure.
When making adjustments to an LSM plan, ensure you also consider the dynamic legal needs of your business.
Conclusion
Legal spend management isn’t a set-it-and-forget-it task; it’s a dynamic process. Think of it as tending to a garden – regular care and adjustments are key to flourishing results.
Stay proactive, leverage the right tools, and foster open communication with all stakeholders involved. As your business evolves, so should your legal spend strategy. Embrace these practices to navigate costs effectively and drive better outcomes.
