3 tips to ace year-end legal budget proposals

Kara Wen | November 21, 2022 | Articles

When Q4 hits, there’s a flurry of activity as departments hustle to tie things up before the holidays arrive. So, why are you putting off your legal budget proposal?

Nothing kills holiday cheer faster than hearing that your legal budget request has been denied.

The ability to demonstrate legal ops’ spend management skills is key to proving its value to the business. And amid a looming global recession, your C-suite will scrutinize your budget proposal more closely than usual.

To succeed, you need the time and mental space needed to create a thorough, strategic legal spend plan that connects back to data and business goals.

Use these 3 best practices to build an objective case for your legal budget and wow the higher-ups, ringing in a truly happy New Year.

Support your budget proposal with legal analytics

Whether you’re asking for a similar or an increased budget, you need to be able to clearly show your department’s needs if you want to gain executive approval. And the best way to do that is by using legal analytics to show the value (and cost) of all that legal does.

Let’s say one of your budget items increased for 2023 because you want to hire a new IP vendor. You could just explain the cost.

We want to hire a new IP vendor because our current outside counsel charges an average $100 more for senior timekeeper rates.

But that doesn’t give C-suite any context beyond the financial toll. Incorporate spend data and data points related to matters, billing, and vendors. These combined details will help you create a stronger argument for your proposal than just relying on spend information alone.

If you use historical data to support your proposal, your explanation becomes:

We want to hire a new IP vendor because our current outside counsel charges an average $100 more for senior timekeeper rates. Additionally, they’ve violated billing guidelines 10 times this year, and their average matter lifecycles have increased 20% since Q2.

This type of business intelligence helps higher-ups to better understand your reasoning, which makes it more likely that they’ll sign off.

Legal analytics also help you show the C-suite what they’ll objectively gain or lose by approving or rejecting your proposal. Instead of just saying you need thousands for new legal tech, you can come to the table with a clear return on investment. For instance, “By investing $X into a new e-billing system, we can save 10% in legal spend annually.”

You can also illustrate clear consequences. Say you’re apprehensive about retaining a pricier firm. With legal data to support your concerns, you can explain how “we could save between $X-$Y by moving work to this cheaper firm, but our current vendor completes matters in half the time.”

Set yourself up future legal reporting success by mastering the basics

When tracking and collecting data for your budget proposal, it’s ok to be a beginner. According to Bloomberg Law, just 38% of legal ops respondents said they have “formal metrics in place to support business decisions.”

Focus on creating a foundation that tracks your company’s most important legal KPIs, and you can build from there. We recommend working on law firm benchmarking off the bat, as outside counsel spend is the top metric used to measure the value of legal ops.

Check out our law firm benchmarking guide to learn how to leverage this process to optimize your legal spend and build your budget case.

Use legal reporting software to save time and improve budget accuracy

Manually building your legal budget proposal takes a significant amount of time and opens the door to errors. As IBM notes, 88% of spreadsheets have at least one error. This makes it harder to concentrate on strategically framing your proposal since you’re focused on just getting it made and double-checking the numbers.

Automated legal technology streamlines the labor-intensive process of building a legal budget proposal. Real-time data integrations also give you greater confidence in the information you’re relying on to develop your budget.

If you’re basing your budget proposal on inaccurate numbers, this will cause massive headaches down the line. No one wants to go to finance or the C-suite to ask for more money based on the argument that “there was a mistake.”

Automated legal software includes built-in, customizable reporting templates. Instead of spending hours pulling your budget proposal together, you can do it with a few clicks.

This type of platform can also integrate with commonly used software across departments, ensuring that all your data lives in one place and updates in real time. In this single source of truth, you can easily see the impact of your internal and external budget estimates. Additionally, legal management software lets you quickly drill down into key granular details like spend by practice areas, vendors, and timekeepers.

If you don’t have solid legal tech yet, do your best with whatever tool you have. In the meantime, keep a list of all the roadblocks you’re encountering with your current tool—especially if you have a limited ability to track data requested by the C-suite. These notes will help you build a stronger case for investing in legal software in your next budget proposal.

Collaborate with finance year round

Prevent hold-ups in the budget proposal review process by looping in finance well before you submit your proposal—not just this year, but in the future too.

This partnership will help ensure your budget requests are viable before you sink time and effort into creating the final proposal. Additionally, finance can effectively plan for the New Year in advance.

Remember, your budget proposal doesn’t just impact legal. It impacts the business as a whole. You want to work together with finance to stay on the same page and keep the company’s financial health in a good place.

If finance gets left out of the review process, they’ll probably be frustrated if the C-suite reaches out with questions about your proposal. They’ll need to find out where your team pulled numbers from, and then they have to take time to redline your proposal during their busy end of the year.

It’s helpful to leverage legal tech when working with finance to review your draft. This way, both teams gain visibility into the same data, and finance can follow along and make sure the numbers align with your proposal.

Additionally, ask finance if they’ve received any specific instructions from the C-suite. For example, needing to cut overall spending by a certain percentage, increased investments in any strategic business areas, or new processes for submitting budget requests throughout the year. Then, you can use that information and make sure your proposal connects with those wide-scale plans.

Say you want approval to give a bonus to vendors that improve on their DE&I targets. You’re more likely to get the green light by tying this ask back to your company’s focus on this area.

Reaching out for finance’s perspective is a great way to build stronger trust between teams and a better working relationship. This internal collaboration is critical for strengthening legal’s reputation as a thoughtful, helpful business partner.

And as the New Year rolls in, keep the teamwork going. Proactively working with finance throughout the year on legal spend management will help you further optimize cost control and support the company’s financial stability.

For optimal spend management, focus on building legal reporting skills in 2023

Nailing your legal budget proposal is just one part of legal spend management. To ensure you’re making the most optimal decisions with your legal budget, you need to consistently analyze, monitor, and report on legal spending throughout the year—not just in Q4.

Build a solid, scalable foundation that'll help you become a data master in no time.

Read the guide