What is Legal Spend Management?

Legal spend management in the corporate law department occurs daily, mostly by legal operations professionals who manage the department’s budget.

Most of the focus with legal spend management centers on outside counsel billings, partner rates or the hiring of alternative legal services providers.

Likely, the legal department manages hundreds, if not thousands, of invoices annually. If the invoices are paper, that is a problem. If the invoices are managed and reviewed manually, that is also a problem.

The way to expedite legal spend management is by the use of automated enterprise legal management software to ensure efficiency, accuracy and minimized errors.

Implement e-Billing to Improve Legal Spend Management

Prior to launching a new legal matter with a new outside counsel team, legal operations can set billing guidelines. This is important to inform law firms what they can and cannot invoice for. Not every firm has the same billing guidelines.

Imagine reviewing invoices manually if billing guidelines are not standard for every vendor! Mistakes are likely to slip through the cracks and can result in the law department over-paying the law firm. E-billing enables a host of functionality to be put in place that benefits the law department. Some of them include:

Automatic review, approval, error-flagging, and rejection of invoices from outside vendors. If an invoice is flagged for potential errors, it is pulled aside for a manual review by someone on the legal team. Some advanced financial management e-billing tools can flag an error in an invoice and automatically correct the error. This type of review saves valuable time for the legal and legal operations team.

It’s highly likely that a legal matter invoice consists of hundreds and hundreds of line items defining the type of work billed along with task codes and descriptions. If the finance department in a corporation utilizes a standard accounts payable system, it would be impossible for that system to track task codes and work descriptions. Automated e-billing software as part of the enterprise legal management solution provides the capability for outside counsel to submit their invoices in a LEDES format.

Consider Smart Bill Review Tools to Cut Legal Spend

Legal department management can report to leadership about task codes with an analysis of work type, how firms contribute value, budget as it relates to lawyers working on a matter and forecasting legal spend.

E-billing software allows invoices to be submitted for review prior to the culmination of a matter or submission of the final invoice. This half-way review of invoices helps with the approvals process and the accuracy of invoices. It helps flag inaccuracies so they can be corrected or negotiated before submission of the final invoice. Law firms enjoy an initial review so they can expect payment more quickly.

Financial management software, part of the ELM solution, offers a breadth of budget and legal spend management tools. Once these tools integrate with the company’s financial solutions, the legal department can more efficiently manage its budget and identify where to target attention to keep the department’s budget balanced.

Use Data to Drive Decisions About Vendor Selection

Beyond e-billing benefits to the legal department, there are opportunities to use data to help balance the budget.

While legal e-billing reduces costs quickly by enforcing billing guidelines and increasing team productivity, full legal spend management goes further than this.

When billing guidelines are implemented, enforced and followed, law firms become better at submitting compliant invoices. With law firms in compliance, more savings can be realized. Many legal departments can see a positive difference in savings stability within a few years after deploying e-billing software. As a result, uncovered legal spend data provides strategic analytics to help develop outside counsel hiring strategy.

Enterprise Legal Management Software Delivers Strategic Data

E-billing and financial management are often part of a larger platform of tools woven into an enterprise legal management platform (ELM).

ELM software provides in-depth data from analytical reports, vendor dashboards, contract lifecycle management, legal hold, billings, scorecards, and benchmark analysis. Legal departments have the opportunity to utilize leading-edge data analysis to inform the finance department and CFO, as well as the Chief Legal Officer, of the health of the law department.

Essentially, ELM tools provide an inside look at the department’s performance, production and efficiency, while also providing an analytical outside perspective of hiring decisions, vendor sourcing and selection, and relationships with outside counsel.

Learn more about legal spend management tools and ELM software. Set up a demo.