Legal spend management is the process by which law firms and legal departments can eliminate financial mistakes and cut unnecessary expenses. Departments can use spend management to define and control their budgets through tracking, analyzing, and reporting on total legal costs, including those incurred by external counsel.
Various tools and software help legal teams manage spend, reduce risk, enhance cost visibility, and improve budgetary performance. But how do you optimize your expenses through legal spend management systems exactly?
5 ways to cut your legal department’s costs
To help your department calculate expenses and identify opportunities to control costs, we've put together a list of the five spend management strategies.
1. Store your spend data in a central location
When you centralize data in one location, you make sure that all relevant stakeholders can access important information simultaneously and instantly. Data centralization eliminates time-consuming tasks such as filing and retrieving contracts, which directly improves the efficiency of the entire department and cuts costs that often happen due to complex workflows.
Simplifying workflows and keeping stakeholders in the same place also makes it easier to detect trends and inefficiencies in expenses. Disbursing data across multiple systems and switching between disconnected platforms opens room for human error and deters team members from developing a sense of the big picture.
With an all-in-one data centralization solution like Lexion, your legal team can eliminate tedious and inefficient processes and decrease overall expenses significantly.
2. Draft a budget plan
Drafting a budget may sometimes seem like a task that falls outside of legal responsibility. However, when it comes to the health of your department and the trust of the business, skipping over your annual budget can cost you dearly.
Your budget is much more than a list of expected expenses. By determining your future budget and examining past expenditures, you get to define departmental objectives, needs, and strategies, which are all essential for long-term success. But before you dive in, take the time to identify and eliminate unnecessary expenses and inefficient practices.
3. Track key dates, deadlines, and vendor obligations
The legal industry lives and dies by calendars. Successful client management means staying on top of payment milestones, deadlines, and contractual obligations from your vendors.
Traditionally, businesses used to hire small armies of support staff to help attorneys stay on top of the most significant dates. It's no wonder why. Complex vendor contracts often come with multiple milestone dates. Some even have payment requirements that change depending on the goods and services delivered. Or the chance to miss an expensive auto-renewals.
Let's take a look at some examples:
- Time and materials contracts: These stipulate the cost of labor and goods but make no provision for the total purchase amount.
- Indefinite delivery or undefined quantity contracts: The contracts function more as Master Service Agreements (MSA) that delineate high-level goals and expectations but don't provide detailed cost expectations.
- Cost-plus inventive fee contracts: These contracts require the buyer to make a bonus payment if the vendor meets specific benchmarks.
Staying on top of all this information via old-fashioned processes can be tedious. Fortunately, modern contract solutions like ours help legal teams with ironclad scheduling solutions. Organize, file, and contract all while collecting key dates into an accessible electronic calendar with built-in e-mail reminder integrations. Save money and strengthen vendor relationships all in one place.
4. Automate your legal billing and invoice processes
If you automate legal billing and invoicing, you free up valuable time for your attorneys and their support staff and allow them to focus on more pressing tasks. More importantly, automated processes tend to eliminate mistakes of late billing or incorrect filing, which cuts costs directly.
E-billing brings legal teams enhanced transparency and efficiency in several ways. When you have automated legal invoices and store them in a central database, you ensure all relevant stakeholders can access them at any time. Legal spend management software systems will also track e-billing, legal costs, and invoicing in easy-to-navigate centralized dashboards.
These convenient layouts and built-in integrations allow cross-team functionality by giving members of the finance, accounting, sales, and marketing teams easy access to relevant file storage and retrieval opportunities.
5. Base future legal spend decisions on past data
If your legal team is making future budgeting decisions based on anything other than past data, you're missing out. All too often, budgets are rendered useless by fuzzy planning, yet they can easily be improved based on historical spending data. For example, if in-house legal services have experienced significant levels of turnover across the past year, it may be time to explore external counsel options to cut legal costs.
Most legal spend management systems offer advanced reporting features to help track counsel spending. These enable legal teams to identify inefficiencies and opportunities to save time and money. Built-in metrics also assist legal teams in tracking spending patterns over time and decision-makers in spotting trends that can inform future spending decisions.
Lexion is your centralized repository for spend management decisions
If you need help with legal spend management, Lexion is here to support you. Lexion is a contract management solution that files and organizes all your contracts under a single platform powered by artificial intelligence (AI). You get to centralize your contracts to help stakeholders access vital business information, automate contracting to reduce manual work and mistakes, and integrate Lexion with existing tools and processes like Salesforce, Slack, and more.
Lexion is also easy to implement without professional support, so you can start improving your legal spend management in a few simple steps. Read our latest ebook all about improving legal metrics or schedule a demo today to learn more about how your team can cut costs while improving overall efficiency with Lexion.