How legal spend tech helps you unlock potential savings

Kara Wen | January 12, 2022 | Articles

In the 2021 EY Law Survey, general counsel listed a “greater use of technology” as the top strategy providing “significant or very significant cost savings opportunities.” Advanced legal software maximizes productivity, reduces human errors, and supports busy legal ops teams in their many responsibilities — especially legal spend management.

A robust legal spend management solution helps corporate legal departments find ways to save money. With most GCs planning to remain laser-focused on reducing legal costs through 2024, this technology will put departments in a better position to reach cost-reduction goals.

Here are four major ways that legal spend tech will help you master legal cost control:

1. Legal spend tech double-checks timekeeper rates

Most law firms bill using hourly rates, with an average attorney costing $300 per hour at the start of 2020. Any timekeeper overbilling that goes unchecked can quickly add up to thousands in unnecessary legal spend.

Legal spend management software mitigates these problems by automating timekeeper rate enforcement, allowing you to quickly identify and address any instances of overbilling or billing with an incorrect timekeeper rate. Without this technology, your best defense is taking hours to manually review hundreds of invoices. This makes it easier for costly rate problems to slip through the cracks.

Automated enforcement lets legal operations set rate caps for each timekeeper role and law firm. This helps prevent double billing and bill “padding,” where firms overcharge to make up for the time they spent on non-billable work. The American Bar Association found that roughly 21% of attorneys do this. So, having a system that flags when someone bills over their authorized rate or hours can add up to significant legal cost savings in the long run.

You can set rules to automatically reject or adjust flagged invoices based on factors like:

  • Attorney classification levels
  • Matter-level expertise
  • Agreed-upon discounts
  • Hourly caps (i.e., no more than eight hours per timekeeper, per day)

Since legal tech tracks timekeeper hours in one central place, it’s also easier to predict budget needs for future legal work. You can additionally use this hard data to negotiate more predictable alternative fee arrangements (AFAs) or blended rates with your vendors.

2. Legal spend tech tracks matter metrics

Without comprehensive insight into the details of legal matters, it’s hard to objectively determine which vendors are performing well. Legal spend tech tracks relevant matter information so you can determine if you’re getting the best ROI from vendors.

For example, legal software helps you make sure vendors are staffing matters appropriately. Think about professors and teaching assistants (TAs) at universities. While both professors and TAs are capable of grading a multiple-choice quiz, would that be a valuable use of a professor’s time? On the flip side, if a peer-reviewed journal needs an expert to weigh in on recent research, is that a job for a TA?

With legal software, you can view detailed matter breakdowns that list the type of work as well as who is working on the matter. This information lets you proactively identify any red flags and connect with your vendors to resolve them. No more paying a high-level partner for work that a less-expensive associate could do!

Legal spend tech also supports the bottom line by tracking how long vendors take to close matters. You can compare matter lifecycle data on law firms that work on similar matters to figure out a reasonable turnaround time. If you have vendors that consistently exceed it, they’re objectively costing you more than necessary — so it may be time to end the partnership.

Additionally, matter data on your most utilized practice areas can help you find a more cost-effective balance between in-house counsel and outside counsel. For instance, if your patent matter spend goes up by 20% every quarter, it’s probably more cost-effective to add salaried IP specialists to your in-house team rather than outsource work to firms that bill by the hour.

3. Legal spend tech enforces billing guidelines

Legal ops teams use legal billing guidelines as a framework to help “outside counsel deliver more cost-effective, predictable, and efficient legal services,” according to Ballard Spahr LLP’s Emilia Levisay. Clear outside counsel guidelines also help improve relationships between in-house departments and vendors, creating a mutual understanding of how matters and billing should be handled.

However, just 23% of law firms say they “always” use a formal process to review and document these client expectations. This can lead to frustrating issues on the legal ops side, like accruals being submitted late or incorrectly formatted invoices. Trying to manually enforce billing guidelines across different vendors, though, is challenging and error-prone. It’s easy to end up paying way more than necessary.

Fortunately, legal spend tech automates this process. You just enter your outside counsel guidelines into the system, and the platform will flag or automatically send back submissions that don’t follow them.

For example, if a vendor submits an invoice with an unauthorized UTBMS code, the legal spend tech will highlight it. It also streamlines the review process for these flagged invoices by automatically sending them to a selected approver. This kind of automation eliminates a lot of manual work while giving you tighter control over legal spend.

4. Legal spend tech improves spend reporting

Without legal spend management software, legal teams have to rely on spreadsheets and legacy tools to collect and analyze information on legal spend data. These labor-intensive resources often have incomplete and inaccurate information. In fact, 88% of spreadsheets contain at least one error, according to IBM. This adds pressure on you when pulling together legal spend reports for the C-suite.

Legal spend tech takes this stress off by acting as a single source of truth that updates in real time. Key spend analytics are automatically tracked and easy to drill down into, from the total spend on different legal vendors to the monthly differences between your actuals and accruals. It’s a lot harder to gain this level of knowledge when using different sources with varying levels of data accuracy.

With enhanced spend oversight, you’ll feel confident that you can deliver valuable business intelligence to the higher-ups. You’ll know the data is accurate because it’s automatically pulled in through integration. Also, you’ll save a ton of time compiling your reports because data is housed in one central location.

Find out how much your legal department could save by investing in legal spend tech

With such a close focus on optimizing budgets, we understand that your C-suite will want to see quantifiable data on the benefits of implementing legal tech before they greenlight significant tech spend. No problem — head over to our savings calculator to determine your company’s unique ROI from bringing on SimpleLegal’s comprehensive legal management solution.

This article has been updated to reflect new information and industry trends from the original article, published on July 29, 2020.

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