Legal operations and finance can work together to enhance legal spending management.
Even though 74% of legal ops professionals said that reducing costs was their top objective for 2021, it’s clear that the two departments should work together more closely.
Legal spending may be better understood when finance and legal operations collaborate. It’s possible for legal to assist finance comprehend how outside law firms bill and why this is significant to the organisation. When this is done, finance may focus on ways to better monitor and control the expenditure.
Legal operations and finance can work together to save time and use the legal budget more effectively.
Connect the two groups through integrations.
By connecting their respective IT systems, legal operations may make it easier for their department and finance to work together more effectively.
As a result of this integration, all of the company’s employees will be able to access the same information. When you centralise budgets, invoices, and monthly accruals, you’ll be able to understand where your money is going, reduce the number of manual procedures, and pay invoices more quickly.
It’s important to keep your legal spending in the spotlight after integrating the accounts payable system. Teams may use SimpleLegal’s built-in connections with Outlook, Box, Oracle, and other applications, or use our API to create their own.
Legal billing criteria should be implemented and enforced.
Billing standards act as a control on the amount of money that firms can spend on legal services. Legal operations and finance should collaborate to develop legal billing principles since each team has a unique viewpoint.
Accounting can leverage information from legal operations, such as timekeeper rates, average expense by issue type, and commonly used UTBMS task codes, to develop billing recommendations. When it comes to creating typical billing intervals, payment alternatives, and invoice distribution methods, experts in finance may provide valuable insight.
You may use a service like SimpleLegal to enforce your legal billing policies once you’ve established them. Automating enforcement eliminates the need for bills to be passed back and forth between approvers and the outside legal firm.. The platform can reject an invoice, alter the amount, or send it to the appropriate person for manual review if it violates the billing criteria.
The time and money that can be saved by implementing and following legal billing procedures is enormous. Ten percent more enforcement can save you tens of thousands of dollars or perhaps millions of dollars in the long run.
A monthly accrual method should be designed.
A monthly accruals procedure is essential if you want to avoid unexpected billing and effectively manage your legal costs. When it comes to managing accruals, no one knows who should be in charge of what. Although legal should ultimately be responsible for the process, it is beneficial for both the legal and finance teams to collaborate on the design of that process, since everyone will have more insight into the budget.
Only 48 percent of legal firms reply to requests for unbilled estimates, according to our internal analysis. Sadly, this means that legal teams are forced to squander time with several follow-ups or give up altogether. As a result, it leaves finance without precise monthly accruals information.
To avoid this problem in the future, automate the request and collection of unbilled estimates. As a last step, you may use a spend management platform like SimpleLegal to automatically track all four categories of accruals: invoices that have not yet been paid, invoices that are pending, and invoices that have been rejected. Accruals are less time-consuming for both legal and finance, so everyone benefits.
From a financial perspective, automating the accruals procedure is the most significant advantage. Unbilled estimate requests from law firms received a substantially better response rate, and we had fewer surprises and revisions at the end of the year.”
Accruals accuracy reports may also be used to continually enhance the process by finance and legal operations. To catch outside businesses who don’t present unbilled estimates or typically have huge gaps between estimates and actual amounts invoiced, set up regular check-ins with the company. Renegotiating contracts with outside businesses, or sending work to an AFA or a more dependable firm, may be done with the use of the data obtained.
Create your own bespoke reports with your team.
Legal expenditure is seen differently by finance and legal operations, yet both are concerned with making the best use of the available funds. Each team should be able to use the reports to defend their spending and make well-informed decisions about their budget.
A well-tailored report helps both finance and legal demonstrate their worth to the organisation. What if your C-suite wants to know how much money you spend on outside counsel?… Using an outside business with an AFA, legal was able to minimise its patent-related costs by 40% while still ensuring that the company’s patents were adequately protected.
Identify the metrics that are important to each department before creating a bespoke report. Depending on the kind of issue, the timekeeper rates, and the success rates of outside firms, legal operations may wish to dive more into the costs of outside counsel. When it comes to the larger picture, finance may be more concerned with how much money is spent and what the return on investment is.
Talk about your objectives and tailor your reporting to reflect that. For example, if finance wishes to keep outside counsel spending in control, reports that break down expenditure by average timekeeper rate might help the legal ops team select the outside firms who have lower hourly prices. For some people it’s all about cutting back on spending; for others, it means spending intelligently. There are favoured panels which offer bulk savings, so legal ops might also report on this.
Control legal costs through cross-functional cooperation.
It is possible to help your company as a whole by working directly with finance – even if it means making your own job a little simpler. Read our whitepaper, Legal Operations 101: A Blueprint for Modern Legal Departments, to learn more about working cross-functionally.