Often, the legal function has been considered that part of the team which is too expensive, causes delays, and also often says no. Now however, legal teams are becoming an important strategic partner in helping businesses scale as their role continues to evolve. Lawyers are beginning to adopt a new way of practicing law which involves coming up with data-driven and innovative solutions. This has opened several new avenues for companies to leverage the insights of their legal team to support business. Yet, businesses are spending a lot on legal fees, especially on outside counsel in order to stay protected and ensure compliance, and these costs have only increased over the past year. More and more teams are beginning to realize the importance of building more efficiency into their legal function whether that is through tech adoption or establishing a robust legal operations framework.
Fixing a problem begins with identifying it.
Imagine you're in one of your monthly Executive Committee meetings, and the CFO turns to you and asks "How much did we spend on lawyers last month?"
You have to have a good answer. You need to know first how much legal expenses are costing your business, and secondly how much of it is unnecessary. The answer will help shape other decisions that affect the bottom line, so it's important that everyone involved—including yourself—has as clear an understanding as possible about where legal costs are going every quarter or year.
Do you know? Or more importantly, can you answer that question in seconds?
As a business owner or CEO, you need to know how much your legal expenses are. You may not be able to control them, but if you don’t have visibility over this expense, it can lead to mismanagement of funds and wasted time in the long run.
You also need to be able to answer this question in seconds: “How much do I expect to spend on lawyers?” If you can't do it quickly and easily with just one click of a button (or tap), then there is no way that your team will be able to make decisions based on facts instead of guesswork—and guesswork leads to only one place: mismanagement and overspend. Precisely, if you can't see how much money you've spent on law firms, you have no control over your legal budget. The importance of knowing where and how much is spent on lawyers cannot be understated: It's important for business owners to know who has been paid by whom and what work was done by whom so that these costs can be monitored effectively.
The challenge with managing legal spend is twofold.
The challenge with managing legal spend is twofold. First, your management team will want to know what is being spent on lawyers, how much it is costing and whether it's value for money. Second, as an in-house lawyer you will want to know why there's been an increase or decrease in legal spending from one month to the next and which areas of the business are spending what.
If you're not already collecting this data:
- How much did we spend? As a minimum, this information should be available at each stage of your project - start up costs include initial funding plus any training that may be required by staff members; ongoing costs include monthly fees plus any other ongoing charges such as invoices from external suppliers (e.g., accountants). You can also add up all expenses incurred during one calendar year so that you know exactly where your organization stands when looking towards future years' budgets
But even those companies with appropriate reporting systems often struggle with visibility over their legal costs because they are buried within other departments' budgets or spread across several different divisions within their organization.
The role of tech tools in managing legal spend
When it comes to understanding what you've spent on lawyers and how much value it has provided for your business, one of the best things that can happen is for someone who isn't directly involved in litigation but may be able to provide perspective about how much money should realistically be spent on outside counsel versus internal attorneys (or vice versa). This person should have experience working at least part-time as an attorney so that he or she understands both sides of any given case; otherwise he/she will likely see only one side—that being "the client" perspective—and not necessarily see things from both parties'.
Of course, this level of information isn't available on a whim - but with the right tools coupled with appropriate processes and people, it should be possible to get this type of data at the click of a button. But what if you don't have access to these resources? What if your company doesn't have enough money or human capital to invest in hiring someone who could do this for them?
That's where tech tools come in! There are plenty of legaltech tools (for e,g. WotlersKluwer and BusyLamp) out there that can help businesses not only track their legal spend but with their intuitive user interface can also project expected legal expenditure and areas of potential optimization. Equipped with this knowledge, businesses can make important decisions about how they want to allocate their resources and more importantly where they do not need to allocate resources.