How legal ops and finance can improve legal spend management together
Finance and legal ops don’t always see themselves as allies, but considering 74% of legal ops professionals named cost control as their top priority in 2021 — they definitely should.
When finance and legal ops work together, the two departments can put legal spend into context. Legal can help finance understand how outside law firms bill and why that’s important to the business. Then, finance can focus on how to better monitor and control that spend.
Here’s how your legal ops and finance teams can work together to save time and use the legal budget wisely.
Use integrations to connect both teams
One way for legal operations to enhance collaboration between their department and finance is to connect the technologies that each department uses.
Integrate legal’s e-Billing solution with the accounts payable system to ensure that everyone is looking at the same data. When you keep budgets, invoices, and monthly accruals in a central place, you’ll see increased spend transparency, have fewer manual processes, and have a faster timeline for invoice payment.
Once you’ve integrated the accounts payable system, continue to increase your legal spend visibility with other useful integrations. With SimpleLegal, teams can take advantage of built-in integrations with Outlook, Box, Oracle, etc., or build custom integrations via our API.
Implement and enforce legal billing guidelines
Billing guidelines are the guardrails that keep legal spend in check. Legal ops and finance should work together to determine what to include in legal billing guidelines because each team can offer different perspectives.
To establish billing guidelines, legal ops can give finance insights into such things as the different timekeeper rates, average spend by matter type, and frequently used UTBMS task codes. Meanwhile, finance can shed light on the importance of setting standard billing periods, payment options, and invoice delivery methods.
Once you have your legal billing guidelines in place, you can enforce them automatically with a tool like SimpleLegal. Automating enforcement keeps invoices from bouncing around from approver to approver and back to the outside law firm. If there is a billing guidelines violation, the platform can automatically reject the invoice, adjust the amount, or send it directly to the appropriate person for manual review.
Implementing and enforcing legal billing guidelines saves both teams a lot of time and money. Even increasing enforcement by 10% can save you hundreds of thousands or even millions of dollars.
Design a monthly accruals process
If you want to avoid surprise invoices and gain better control over legal spend, you need to nail down a monthly accruals process. Accruals management often gets bounced between legal ops and finance because no one is sure who should handle what. Ultimately, legal should own the process, but involving finance in the design of that process will benefit both teams in the long run because everyone will have more visibility into the budget.
Our internal study shows that only 48% of law firms respond to requests for unbilled estimates. Unfortunately, this forces legal teams to waste time sending multiple follow-ups or to simply stop trying. However, this leaves finance without accurate monthly accruals data.
You can get ahead of this issue by automating unbilled estimates requests and collection. Then, you can use a spend management platform like SimpleLegal to automatically track all four types of accruals — unbilled estimates, pending invoices, invoices with missing information, and rejected invoices. Legal spends less time on accruals, and finance gets more accurate data — everybody wins.
Jia Hua Juszczak, senior accountant at NextRoll, says, “From a finance standpoint, automating the accruals process is the biggest benefit. We saw a much higher response rate to requests for unbilled estimates from our law firms, and we face fewer surprises and adjustments at month and year end.”
Finance and legal ops can also use accruals accuracy reports to continuously improve the process. Set up regular check-ins to flag outside firms that are not submitting unbilled estimates or often have large discrepancies between estimates and actual amounts invoiced. Legal ops can use the data to renegotiate contracts with outside firms to switch to alternative fee arrangements (AFAs) or send work to a more reliable firm in the future.
Build custom reports together
Finance and legal ops may look at legal spend differently, but they both want to use the budget wisely. Reports should give each team the information they need to justify spend and make informed budget decisions.
When catered to your business goals, reports help both finance and legal prove their value to the company as a whole. Let’s say your C-suite wants to know about outside counsel spend. Legal ops could share a report that shows that by switching 50% of patent prosecution work to an outside firm with an AFA, legal was able to reduce patent-related spend by 40% while still protecting the company’s patents.
To build your custom report together, start by determining what metrics matter to each department. For example, legal ops may want to dig into spend by matter type, timekeeper rates, and outside firm win rates to better evaluate outside counsel. Meanwhile, finance may be more concerned with the big picture — which categories of spend use up the budget and what’s the ROI of that spend.
Make sure you discuss your goals together and customize your reports accordingly. For example, if finance wants to keep outside counsel spend in check, reports that break down spend by average timekeeper rate can help the legal ops team choose the outside firms that have lower hourly rates. Of course, controlling spend isn’t always about spending less; it can also mean spending the budget wisely. So, legal ops could also report on the percentage of legal spend tied to preferred panels that give volume discounts.
Gain control of legal spend through cross-functional collaboration
There are many ways that working directly with finance can benefit your organization as a whole — and maybe even make your job a bit easier. To learn more about working cross-functionally, read our whitepaper: Legal Operations 101: A Blueprint for Modern Legal Departments.