How to reduce your legal spend in three steps

How to reduce legal spend in three steps

Under the pressure of tight budgets, cost control is a top priority for in-house legal teams. Here are three easy ways to cut your legal spend down to size.

In the face of an uncertain economic global landscape, tackling legal spend has never been more vital for in-house legal teams – whatever their size. Against a backdrop of rising outside counsel fees and internal pressure, cost control remains the highest priority for corporate legal departments in the US this year (Thomson Reuters, 2023 State of the Corporate Law Department report).

There’s no doubt that software is one of the most efficient tools for managing legal spend. However, with the market traditionally dominated by heavyweight e-billing solutions, many corporate legal departments have been unable to justify investment in tech, instead remaining reliant on manual processes for this critical element of their work. Indeed, only 21 percent of teams surveyed in The 2024 In-House Legal Technology Report are currently using any legal spend management software at all.

In this article, we explore three ways that leaning on the right technology can help you get a handle on your team’s legal spend quickly and without excessive investment.

Getting your legal spend under control with the right tech

For legal leaders scrutinizing budgets, the most obvious road to reducing costs is often simply to decrease outsourced work. However, with some degree of outside counsel likely to be inevitable, it’s important to assess the roadblocks you currently face, and consider how you might reduce their associated costs in other ways.

While retrospective line item review can help, it can also deplete your internal resources and erode your professional relationships in the process. Taking a strategic approach to legal spend management matters from the moment your outsourced work begins, and it’s a mistake to assume that it’s simply about nickel and diming your outside counsel.

If you’re looking to make a meaningful and sustainable impact on your legal spend across the board, it’s worth considering an approach which takes control not only of your outside counsel spend, but all of your internal legal costs too. Read on for three tech-enabled ways to achieve this.

Step one: Automate e-billing and invoice review

Centralizing, tracking, and completing approval workflows for outside counsel invoices is a major administrative burden which comes at a cost to your in-house legal team. Whether you are dealing with one or more legal service providers, relying on email and spreadsheets for invoicing is time consuming, and carries a high risk of items falling through the cracks.

To get things moving faster, consider a legal tech solution which includes consolidated review features, including e-billing and invoice review. This will allow you to centralize and streamline your workflows, ultimately freeing up more of your own team’s time and reducing your overall reliance on outside counsel.

Flexible e-billing

The relationship between an in-house legal team and their outside counsel is a symbiotic one – and frankly, neither party wants to spend a moment longer than necessary on admin. Consider a solution which supports multiple workflows so that you have the flexibility to get up and running quickly.

In an ideal world, your solution should allow you to build a directory of legal service providers and choose how you work with them. For example, you may wish to:

  • Invite them to upload their own invoices and collaborate directly on relevant matters
  • Allow them to upload their own invoices while restricting collaboration access
  • Simply keep them in your directory, and upload their invoices yourself

Being flexible on your approach to invoicing and sharing the load doesn’t just create a huge time-saving opportunity, it also goes a long way towards maintaining a harmonious working partnership with counsel.

Streamlined invoicing workflows

Whether you choose to complete your legal spend administration in-house or delegate it to outside counsel, you can streamline the invoice management process and speed up time to payment by choosing legal spend management software which allows you to:

  • Upload PDF and LEDES invoices to create a central e-billing repository
  • Use AI-powered invoice extraction features to eliminate the need for data entry
  • Use simple user interfaces to perform at-a-glance invoice review
  • Perform hands-free payments with automated approvals for accounts payable

By utilizing simple features like the ones above, you’ll escape the chaos of email, reduce the administrative burden, eliminate the risk of late payment fees, and save valuable time – all whilst generating a bank of data which you can use to track and report on the bigger picture later on!

Step two: Collaborate more efficiently with outside counsel

While getting your e-billing under control is critical to reducing front-line costs, proactively managing the entire lifecycle of your relationships with outside counsel will have a far bigger savings impact in the long run. When you’re considering legal spend management technology, look out for features which will allow you to centralize, streamline, and control all of your legal service provider work from start to finish. These might include:

Bulk RFPs

When it comes to managing requests for proposals, being able to reliably pick the best provider for the job is critical. A good RFP capability will let you quickly capture fee arrangement, budget, and cost expectations up front, ensuring that you’re always comparing like-for-like and leveraging competitive tension to your advantage. What’s more, sending, receiving, and comparing responses from multiple providers within a single system saves much needed time on admin.

Scope management

Even if you’re clear on hourly rates, failing to nail down the scope of an assignment can lead to unwelcome surprises when it comes to the final bill. If your software allows you to standardize the parameters of every job from the outset, you’ll be able to brief outside counsel more efficiently – and make sure expectations are aligned from the get-go. It’ll also help you enforce scope and control costs as the matter progresses.

Monitor WIP

Your work with outside counsel shouldn’t disappear from the radar between briefing and the final invoice. The ability to monitor progress at any time is essential to ensure that accumulating costs stay on track with forecasts – so consider a tech solution which provides complete visibility over all of your ongoing outsourced work.  In doing so, you’ll trade time-consuming searches for updates in your email inbox for a more secure, efficient way to capture status updates and the exchange of critical information – thereby reducing costs further as work progresses. By adopting even some of the above practices, you’ll quickly upgrade the way that you work with your legal service providers – delivering smoother instructions, eliminating nasty surprises, and freeing up more of your own team’s time for higher level work.

Step three: Use data-informed reporting

Once you’ve got your immediate spend under control, it’s time to think about measuring and reporting. In order to be sustainable, budgets need to be data informed – and that can be achieved by tracking key legal spend-related metrics. However, with over 70 percent of respondents to The 2024 In-House Legal Technology Report still spending over an hour per day jumping between systems to gain a complete overview of their work and 66 percent spending more than an hour a day compiling assets needed for reporting, clear insight remains a struggle for many.

When you’re considering prospective technology solutions, look for software which captures all your internal and external data and presents it in an accessible way. By making this a priority, you won’t just save time compiling reports – you’ll also equip yourself with the data to back up timely conversations with outside counsel when it’s needed.

Finally, your approach to reporting should arm you with insights which are robust and comprehensive enough to provide answers to even the toughest leadership questions. When you’re assessing software solutions, think about whether they offer the ability to track the following spend-related metrics:

Spend vs budget

Your solution should let you keep a close eye on your total spend of each legal service provider that you’re working with, and how you’re tracking against budget at any point in time.

Internal vs external counsel

A bird’s eye view of the type and volume of work being handled by your outside service providers versus that kept in-house is key to spotting trends and identifying opportunities for adjustment.

Invoice approvals

Make sure that you can access a snapshot of all invoices that have been approved or are pending approval at any given time. If your solution lets you delve deeper into invoicing trends, such as the average number of days taken for approvals, even better!

Matter types

To make sure your outsourcing is hitting the mark when it comes to cost and expertise, look for a solution which gives you visibility into which firms are carrying out which types of work for your organization (for example, regulatory, finance, or IP). Whilst many legal teams currently use single firms for a broad range of work, recent reports from Gartner predict that this is set to change, with task-based outsourcing becoming the preferred way to maximize return on external investment.

Regardless of how deeply you choose to delve into it, a comprehensive data source will set you on the right track when it comes to fine-tuning budgets, informing strategic decision making, and showcasing your team’s success at leadership level.

The added value of a workspace approach

If your spend management software equips you with everything you need to accomplish these three steps, you’ll be well on your way to gaining control over your legal costs. However, according to Gartner, very few in-house investments into outside legal spend management extend to internal work, with most teams lacking even a basic intake system. This places a limit on the utility of an isolated solution, as it cannot connect the dots between your outgoing costs and the wider workflows which generate them.

If your legal spend management goals are a little more ambitious and you want to extract maximum savings from your tech investment, consider taking things one step further with an alternative approach – spend management within a legal workspace. A legal workspace, such as LawVu, is a comprehensive solution which integrates legal spend with contract and matter management, as well as providing 360-degree reporting across your function.

A workspace approach not only lets you streamline all your internal work whilst facilitating collaboration across every element of your legal function – it also restores the fundamental connection between your costs and the rest of your work, positioning legal spend data alongside the contracts and matters which form the context for every dollar spent. With legal spend as your anchor, this will empower you to develop wider business strategies which reflect and support every facet of your legal work.

By taking advantage of a comprehensive workspace, you should also start to see results beyond a simple reduction in legal spend on outside counsel – every hour saved on internal processes will lead to further savings, with newly gained internal capacity opening the door for more work to be brought back in-house.

Ready to start reducing your legal spend?

Whatever the size of your team, the LawVu legal workspace brings simple, effective, and affordable legal spend management within reach. By reducing costs, optimizing efficiency, and gaining visibility over your legal spend, you can place your finances back where they belong – at the forefront of your operation.

To learn more about how your team could reduce their legal spend with LawVu, click here join us on an on-demand demo today.

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