Managing Your Company’s Legal Spend by Eliminating Cost Surprises

“Surprise!” is not something you usually want to hear from someone reporting to you on outside counsel billing or the entire spend of your legal department.

Save surprises for a milestone birthday. In the case of budgeted-to-actual billing reports, there is nothing like the sweet sound of just what was promised and expected.

Given many legal matters’ open-ended and unpredictable nature, don’t expect entirely accurate forecasting. However, there are many steps to minimize the variables and help control risk regarding overall spend, including some measures available through legal e-billing.

1. HISTORIC REVIEW

To look to the future, first, start with the past. A comprehensive review should include the legal services performed in-house and outside, by category; which outside firms performed the different types of service; the mix and billing rates of timekeepers; the number of hours budgeted and billed; and any broken guidelines. Estimating becomes more reliable by reviewing past spend and identifying trends and potential or likely areas of change.

2. ESTIMATE, ESTABLISH BUDGETS, AND TRACK YOUR SPEND

With the features and data available from today’s e-billing software, the estimation, budgeting, and tracking process has become simpler as the information accrued has become more detailed and accurate. By mining the data, it becomes clear what costs, staffing, and time can be reasonably expected from similar matters so that initial estimates can be more on-target. Develop an annual budget broken down by month; track it; check mid-month or phase by phase to see if any forecasts need to be revised and, if so, why.

Establish clear expectations with outside counsel and have them generate regular status reports and request unbilled totals, if necessary.

3. ESTABLISH AND MONITOR GUIDELINES

Established guidelines are essential and should cover the full range of service variables: billing rates and staffing expectations; billing formats; reimbursable expenses; and timing. Establish provisions for failure to adhere to the regulations. For example, what if a 90-day limit is in place for filing invoices, and an outside firm sends a bill six months after the fact? (You do not want a holiday surprise like that for work performed in the summer.)

Download “Getting Started with Billing Guidelines” for examples and how to write them.

4. ALTERNATIVE FEE ARRANGEMENTS

Alternative fees can be a means of managing spend, reducing spend, or eliminating surprises. Arrangements can include retainers (an established amount paid for a specific period), blended rates (covering partners and associates), fixed fees for particular projects, a cap on rate hikes, or a volume discount once reaching a certain level of spend with one firm.

With e-billing systems like those in BusyLamp eBilling.Space, you can establish, share, and submit budgets; track projects, progress, and spending; generate reports; and readily and automatically collect and analyze data.

Of course, given the technological advances of recent years, that should come as no surprise.

Learn more about BusyLamp from Onit, our end-to-end legal spend management solution built for European corporate legal departments.