Improve and Simplify Your Legal Spend Budgeting and Forecasting

by | Mar 15, 2022

Legal spend budgeting
All companies and their legal departments must tackle the problem of managing costs, developing and adhering to a budget, and hiring and collaborating with outside counsel. However, predicting costs and managing budgets has gotten more complex as the legal industry changes and evolves. In today’s corporate environment, financial management is expected to play a much more strategic role in legal operations, which can impact overall company results.

These complications and expectations have made it extremely valuable for legal departments to implement a budgeting strategy that aligns with departmental objectives. With technology that streamlines processes and ensures accuracy in budgeting and dealing with outside counsel, in-house legal departments can now align their work with the strategic objectives of their company and its executives. LexisNexis® CounselLink® technology enables legal departments to implement cost management, workflow efficiency, data and analytics collection and assessment, and many other tasks and benchmarks requested by finance or other departments within the organization.

While research shows that many legal departments are working with fewer law firms, the amount and scope of work departments handle and send to outside counsel is growing. Handling more matters only increases the need to implement a strategic and effective budgeting process to meet financial targets.

Getting started with expert best practices and top tips from CounselLink users

According to a recent white paper based on the successful experiences of CounselLink users, the following are the best practices and tips to help simplify the implementation of a strategic budgeting process.

Document the process

Creating and updating a roadmap of your budgeting process is useful for thinking through the various decisions that go into it. Flow charts are important tools with proven utility for guiding, documenting, and communicating activities and progress related to such processes. In the article, Reining in Legal Spending: How Corporate Counsel Prevents Overruns by Automating Budget Monitoring, Micah Johnson and Joanne Irwin explain that it makes sense to manage a unique budget for a specific matter; whereas, in other cases, it’s better to group related matters together for more streamlined and efficient budget creation and tracking.

Start small and scale up

Starting with a pilot approach allows you to work through the details of the budget process, identify any problematic issues, and resolve them before widespread implementation. It’s a good practice to select one in-house counsel or just a few law firms in order to test-drive your process first.

Provide a cheat sheet

It’s a relatively small thing, but if you are going to ask law firms to submit budgets, providing a cheat sheet that highlights what you expect of them can be very helpful.

Plan the process beforehand

Having to introduce a number of post-implementation changes to a budget process can undermine your law department’s credibility—both in the eyes of its outside counsel and in the eyes of your organization’s management. This underscores the importance of planning, anticipating what is needed, and avoiding the confusion and frustration that result when a series of changes are required to address problems after a sub-optimal budget process has already been underway for some time.

Determine what is reasonable before approving budgets

Failure to determine a reasonable budget for a specific matter or group of matters before approving it can lead to serious problems. For example, a firm may decide to sandbag the numbers to avoid ending up with a negative variance. Since your department’s objective should be to pursue budgets that are accurate, instead of rewarding a firm for coming in under budget, treat the variance the same way you would if the firm had exceeded the budget.

legal spend budgeting

Check out the resources cited below to learn more about the importance of strategic budgeting, implementation of associated processes, and the benefits that result from this approach. Additionally, you can contact us to learn how we can help your department implement and improve legal spend budgeting and forecasting.

CITED SOURCES:

Johnson, M. & Irwin, J. (2021, December 8). Reining in legal spending: How corporate counsel prevents overruns by automating budget monitoring. CounselLink. https://counsellink.com/2021/12/reining-in-legal-spending-how-corporate-counsel-prevents-overruns-by-automating-budget-monitoring/

LexisNexis® CounselLink® (2015). Law Department Budgeting and Forecasting: How to Plan, Implement and Benefit From a Formal Budgeting Process [White paper]. CounselLink. https://bit.ly/3Cj20KB

Joanne Irwin
Joanne Irwin

Joanne Irwin is a Senior Product Manager leading the Financial Management development teams. She has more than 15 years of experience working in the legal industry and with the CounselLink application. As a former client and consultant, she brings a unique mix of experience and perspective to the Product team and meets with clients to better understand their needs and stay current with the ever-changing market demands.







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