Staying in control of legal costs is one of principle ways legal departments can demonstrate value. That said, according to Wolters Kluwer’s 2019 Future Ready Lawyer Survey, 50% of in-house lawyers identified reducing/controlling outside legal costs among their biggest challenges.
Here is a practical 5-step guide for managing legal costs so that you can transform your legal department into a true value-centre:
Step 1: Register all your cost related information in a legal management platform
If you’ve been using emails and spreadsheets to manually track legal activities, budgets, invoices and costs, you’re likely wasting time, and at risk of making errors. Instead, you want to centralise all this information in the same system you use to manage your activities or matters. This helps you quickly link costs to specific contracts, claims, assignment letters or other matters. When you see how costs are distributed across various areas, you can start to manage them in real-time, from approving, reviewing, adjusting or rejecting costs at any time.
Step 2: Monitor costs against your budget, over time
To stay on top of your legal spend, you want to set up a dashboard that shows your actual costs and budgeted costs side-by-side. This way you can see where you are overspending, by activity, matter or even by entity, and take action immediately. What’s more, looking at your costs year over year, or changes in costs and accruals over matter lifecycles can help you forecast legal spending more accurately.
Step 3: Set up standard reporting based on your business needs
Once your legal cost information is centralised, you can quickly generate the insightful reports you need on a regular basis. Need to provide a mid-year spend update? Need to prepare for a meeting with your law firm? You will always have the most accurate information at hand to support decision-making.
Step 4: Set (and enforce) the rules
Excessive legal costs? Check into your billing guidelines and processes around enforcing negotiated rates. If you are well structured, you will be in a better position to identify and correct deviations (lines where rates are different to what was agreed upon) and avoid incurring excessive costs.
Step 5: Optimise firm selection
With better visibility over costs by law firm, you are in a much better position to assess performance, and eventually optimise selection to ensure that outside counsel is not just an incurred cost but is providing value.
Do you still rely on manually updated spreadsheets for your legal costs? Learn more about how you can manage your invoices and legal costs more efficiently and elevate legal department performance.