How advanced spend management tools can help your legal team analyze legal spend and billing data for better budgeting and predictions
Legal departments are grappling with the challenge of doing more with less. The burden of heavier workloads, shrinking budgets, and escalating costs for outside counsel requires a strategic approach to legal spend and billing data analysis to ensure sound financial management and a return on investment.
Top-performing legal departments embrace technology to provide best-in-class solutions to spend management. These tools allow for better efficiency and data analysis for more accurate spend predictions.
|State of legal department technology
|Legal department challenges
|Best-in-class spend management solutions
|Predictive spend solution
The state of legal department technology
According to a report from Thomson Reuters, nearly 60% of legal departments in recent years report increased work demands, while almost 30% have had to cut back on spending.
Spending on outside legal counsel also is impacting budgets. While the need for counsel hasn’t changed much, costs have increased as firms work with more senior-level partners. Additionally, timekeeper rate increases went up by 5.5 percent in the first quarter of 2023. These factors can make spending difficult to predict for firms struggling to manage and control expenses.
All of this has helped contribute to a recent surge in technology adoption by legal departments — over half have ramped up tech usage — as part of a strategic shift to gain an advantage over competitors.
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Legal department challenges
There’s no doubt today’s legal departments face various challenges in spend management. And these can directly impact the department’s ability to operate efficiently and strategically.
Some of the most common challenges include the following:
- Lack of transparency in spending
- Insufficient visibility into risks associated with legal matters
- Escalating hourly rates and unchecked spending
- Challenges in hiring and retaining staff due to changing workforce expectations
- Overwhelming variety of legal tech offerings leading to fragmented solutions
Despite the challenges, legal departments have opportunities to improve operations and see a real return on dollars invested. Instead of taking a backseat, you can play a key role as a strategic partner in the C-suite and help guide overall operational discussions.
Some of the benefits of spend management tools include:
- Accurate capture and reporting of critical data with advanced spend management tools
- Reduction in costs through better forecasting and informed decision-making
- Increased bargaining power in negotiations using benchmarked data
- Alignment of legal spending with market changes
- Transformation into strategic enablers through data-backed insights
What best-in-class spend management solutions look like today
Tools that can incorporate data analytics and AI-based insights in a cloud-based format offer far more than traditional cost tracking.
These spend management solutions stand out because they enable predictive analysis for future spending. Legal costs can change rapidly, especially from outside counsel. Understanding and predicting these costs is critical for effective budget management, which helps facilitate proactive decision-making and adaptability to changing conditions.
Spend management solutions also can help legal departments gain a competitive edge. You can help enhance operational efficiency by adopting cloud-based reporting and process automation, shifting the focus from routine manual administrative tasks to strategic, client-centered activities. This approach streamlines operations, strengthens risk mitigation, and ensures compliance with financial regulations, crucial for maintaining a good reputation.
With best-in-class solutions, your legal department can go further. These tools can help you better categorize work and identify spending patterns to help optimize budgets, target key benchmarks and metrics, and allocate resources more effectively. Using this approach, you can take more proactive steps for your financial strategy instead of operating defensively from the back foot.
Moving to predictive spend
Legal departments face increasing pressure to manage costs effectively while maintaining high-quality legal services. The importance of a robust, technology-driven spend management strategy can’t be overstated.
By leveraging the right tools, legal departments can manage current spend more effectively while anticipating and planning for future financial needs, ensuring sustainable and strategic legal operations.
Are you looking to more effectively analyze legal spend and billing? Learn more about top legal departments’ budgeting challenges and how they stay on track by downloading our white paper, Moving from spend management to predictive spend.
Moving from spend management to predictive spend