How can you prepare for the year ahead, amid stagnant budgets, growing workloads, and economic uncertainty? Here are three tips for an in-house legal...
Tracking matter budgets
In-house legal budgets are only getting tighter. Here are 6 tips to help you manage your legal matters and external engagements and avoid budget blowout.
In-house legal budgets are tight and getting tighter. Unfortunately, there is not a commensurate drop in legal demands within an organization to match the falling legal budget: whether it be privacy, pandemics or generative AI, the regulatory landscape continues to get more complex, and the legal response must match the demand, both in quality and speed.
Within this landscape, in-house legal teams must monitor their external counsel spend carefully to extract the highest level of effectiveness and efficiency – that is, great quality legal advice, delivered in a timely manner to facilitate the strategic goals of your organization without breaking the bank.
Managing your overall in-house legal budget is one thing – keeping track of your legal spend in real time will give you visibility over your resourcing options before you outsource your legal work to external counsel and help you avoid bottom line blowout. This should be done using your legal operations software.
However, it is at the individual legal matter management level that real budgetary change can be achieved. Whether you currently manage an individual legal matter budget through an excel spreadsheet or use a legal matter management software, matter budgets that are monitored are more likely to be managed to meet expectations.
If you are not doing either of these things, and frequently suffer sticker shock when receiving a bill from your outside counsel, then making a few clear changes around your engagements will help you to achieve meaningful budget repair.
How can external counsel engagement fees be managed?
1. Choose carefully
Be intentional about who you choose and why so that you can appropriately match resources to your legal needs. Relationship driven engagements are important in an emergency (the lights went out, we need somebody to call the electrician immediately!), but they should not be the norm. Engaging a sledgehammer to crack a nut might be overkill and very costly without the commensurate return.
2. Be clear about the scope
What instructions are you giving to your external counsel? Make sure it is in writing and can be easily referenced to ensure you get the deliverables you need. Time invested in setting out a clear scope will save you time on clarification later, particularly if this is after you receive the bill.
3. Set a budget
Ask the question: how much will this cost? If you haven’t yet explored alternative fee arrangements or fixed price billing, now is the perfect time, particularly for routine, repetitive types of work. Ideally, you will track this budget estimate in your spreadsheet or legal matter management software, and it will be visible to your external counsel so that they are kept accountable to that number. If the scope or the circumstances change, update it. We know that both parties will be reasonable about this, but expectations and accountability will help keep it on track.
4. Set billing guidelines
These can be simple and sensible – no need to over-cook the relationship you have with your external counsel in a way that may inhibit the service you receive. However, you want to ensure that you receive a full narrative and breakdown of the work that has been done, and the fee earners involved in delivering the work to you.
5. Monitor the budget
As invoices are received on the legal matter, make sure they are within or on track to hit your budget. This might sound obvious, but invoices are frequently received and rubber-stamped without review. Take the time to review the invoice and ensure that it is complete, appropriate to the work done and within budget. If not, question it!
6. Restrict invoice submission
Your legal operations software should restrict invoice submission when it is outside budget or time frames to avoid nasty surprises and keep your external counsel accountable. If you do not currently use a matter management system, make it clear in your billing guidelines that invoices must comply with these restrictions.
Managing legal matter budgets can be tiresome, but you invest the time and energy at the front end or the back end. By taking these six steps to manage your legal matters and external engagements, you will save yourself difficult conversations and ensure that your matter budgets are respected. And the legal budget bottom line will be healthier for it!
Spend management software for Legal Departments
Easily keep track of your spend and avoid legal budget blowout with Xakia's legal spend and external counsel management software. Get in touch with the team today for a demo and see it in action.