3 tips to ace legal spend management reporting

Kara Wen | July 7, 2022 | Articles

Legal spend management reporting can be a time-consuming and complicated task — especially when you have other responsibilities that need your attention. However, without direct oversight, legal costs can quickly get out of control. There’s also widespread pressure on legal departments to deliver more with less — almost 30% of in-house legal teams were asked to reduce their spend in 2020, regardless of their rising workloads.

How can you manage reporting and, if needed, find areas to cut costs? With a simple, repeatable reporting process that generates quick, accurate, and actionable information for your organization.

To that end, we’ve put together a few tips to help you create and manage your own legal operations reporting process.

Tip #1: Standardize your vendor e-Billing process

A standardized e-Billing process for all of your vendors makes billing simpler and will help you deliver accurate reporting on your legal spend. An organized billing process helps you control legal spend and ensure that your entire organization has access to accurate, up-to-date information.

Start by collecting legal invoices that cover the key cost centers within your budget. Your cost centers could include:

  • Payroll costs for in-house employees
  • Vendor costs for third-party services
  • Cost of legal services from an outside counsel
  • Accruals

This is a great opportunity for an invoice review, so you can understand how your invoices are organized and how line items are categorized. If your invoices are tough to find or your billing data is hard to understand, there are automation solutions available to streamline and optimize this process.

Hopefully, your e-Billing runs like a well-oiled machine with few mistakes. However, details can sometimes get overlooked, especially in large-scale corporate legal departments. Watch out for:

  • Missing details or descriptions on invoices (vague billing)
  • Improper coding — you may need to adjust if your UTBMS and ABA codes aren’t entered correctly
  • Costs that are out of the norm
  • Records that aren’t in LEDES file format

If you do find recurring errors in your invoices, you may need to establish new e-Billing guidelines that lay out a specific workflow for your department to follow.

Accurate reporting is crucial for budgeting

You need accurate reporting for your company to budget effectively. You may also need to meet regulatory compliance — the Sarbanes-Oxley Act, for example, has strict requirements for financial recordkeeping that publicly traded companies must follow. Compliance represents the second-highest category for tech-related spend, according to a 2021 benchmarking report from the Association of Corporate Counsel (ACC).

What’s more, accurate financial reporting can uncover problems within your company, like billing mistakes or overspending. It can be difficult to get this process right, however. It requires detailed recordkeeping from multiple people in the organization, plus a company-wide method for organizing records.

For admin employees and others in legal ops, creating and maintaining an accurate e-Billing system can be a heavy lift. A legal e-Billing management platform can help reduce that burden by automating steps in the billing process and organizing invoices into a centralized database that’s updated in real time. This improves recordkeeping accuracy and generates actionable insights based on machine learning.

Tip #2: Treat your report as a living document

Rather than thinking of your legal spend report as a static document, think of it as the final outcome of a process where you compile your spend data, double-check and organize it, and offer an analysis of what it means. Do this regularly (monthly, quarterly, or on-demand), and you’ll create a record that you can use to spot trends.

There are a few core pieces that you should include in your report:

  • Total departmental costs by month or quarter, depending on your company’s reporting schedule
  • Forecasted costs for the next time period
  • Explanation of any costs that are out of the ordinary
  • An analysis of your spend data, along with any requested budget changes you have

You can drill down much further into your reporting to include detailed information on company priorities. As a good general practice, establish key performance indicators (KPIs) for your department that track back to overall company goals. Your KPIs will vary but could include common industry metrics like your monthly or quarterly spend broken down by:

  • Cost center
  • Project or matter
  • Third-party service providers
  • Timekeeper

Your departmental needs will change

Your legal spend will change over time as new projects and priorities emerge. If your spend report is a living document — meaning it’s easy to reformat, update in real time, and share across your organization — you’ll be able to adapt to the shifting needs of your company.

For example, if your company has established a goal of tightening up data security, you can offer specific, tailored information about how your departmental budget supports that project. That could include the spend you’ve dedicated to a data breach response plan or a consultation with an outside expert on best practices for in-house security.

To respond to changing reporting needs, create a comprehensive database that compiles all of your spend information with a high level of detail: think spending categories, cost centers, specific vendor information, etc. Then you’ll be able to build custom reports that break down your costs based on the factors that are top of mind for your team right now.

An adaptable template will make this process easier — and a centralized spend data dashboard that’s accessible to your entire organization will further simplify your reporting process.

Tip #3: Think of your audience when analyzing the data

Your spend report is your chance to put a data-backed analysis in front of your company’s key decision-makers. Don’t simply share your spend data; interpret what you’ve found and deliver insights that are tailored to your audience. Your analysis has the potential to be the most compelling and actionable part of your spend report.

Your final report should offer the most important information and insights upfront in an easy-to-understand format. And “easy-to-understand” varies depending on your audience. Consider who you’ll be presenting your spend analysis to: legal department management, finance, or C-suite executives? Your audience will determine:

  • How much time they can devote to reading your report
  • The spending categories that are most relevant to their work
  • The questions they’ll have regarding your legal spend

For example, a C-suite audience is probably looking for targeted at-a-glance information to help with company-wide decision-making. A well-formatted report should, therefore, include a short overview with costs broken down by the key categories that high-level executives are interested in. In this situation, you can also provide an attachment with in-depth supporting information that leadership can reference if they want to take a deep dive.

As part of your analysis, note how your department budget gets allocated. Which areas do you spend the most on and which require the least funding? Are there areas you could cut or other areas where you need to allocate more? Craft recommendations based on your past spending data — treat that as evidence when you make your case.

Over time, you can use your data to create benchmarks that show your typical spend. Then you can forecast future expenses and spot changing trends. This offers predictability to the rest of your organization.

Legal spend reporting gives you a voice during budget discussions

Your legal spend analysis is also your chance to protect your current budget or even ask for an increase. Other departments may not know what you need to do your work effectively. It’s up to you to explain how legal spend benefits the company as a whole. Use your analysis to ask for what you need or to show how valuable your department’s work has been.

Across the industry, the role of legal ops has evolved, and your responsibility as a key strategy-setter has increased. In-house legal now has an important voice in overall business strategy discussions. Your legal spend report provides the evidence you need to make informed business recommendations.

You can highlight the areas where your ops are most efficient and make a compelling argument that shows you spent company dollars to generate positive results. Pay special attention to projects that are dedicated to risk mitigation and prevention. Revamping your contract process, for instance, may not look like a win to those outside of your department unless you explicitly point out how that project shielded the company from potential harm.

You can also offer a data-backed argument for increased spending if needed. If you’re looking to grow your department, for example, you can highlight instances where having an in-house employee (not a third-party service provider) would’ve saved costs and maximized your departmental efficiency. As departments look to move more legal work in house, it’s important to be able to make a compelling case explaining why that’s a beneficial change for your company.

While you can create your own process and templates for generating unique insights about your departmental budget, legal spend management software will make things faster and easier to replicate.

Legal spend management software simplifies reporting

Spend tracking and reporting doesn’t have to be a complicated process. Dedicated legal spend software can keep costs clear and ensure that everyone in the organization has a view of how the legal budget is allocated.

Modern legal spend software also gives you the option to customize reports to fit your needs. Armed with detailed legal spend analytics, you can highlight the budget areas with the most impact on your company’s bottom line and create different versions of your report for different audiences across your organization. Find out how the SimpleLegal e-Billing solution can support your legal spend management.