ACC Legal Ops: 5 accruals management best practices from Fitbit & Veritas

Last week, Chicago hosted hundreds of legal operations professionals at the Association of Corporate Counsel (ACC) Legal Operations Conference. Here at SimpleLegal, we love legal operations, so we knew we couldn’t miss a conference dedicated to the growing and influential legal ops role.

SimpleLegal was proud to be a Platinum Sponsor at this year’s event and presented on one of our favorite legal topics – accruals! Our CEO, Nathan Wenzel, was joined by SimpleLegal customers, Jill Fukunaga and Emelita Hernandez-Bravo, Head of Legal Operations at Veritas and Fitbit respectively.

In this post, we’ll be recapping the session and sharing some of the challenges and solutions that both legal operations veterans faced as their departments started focusing on accruals. If you’d like a bit of an accruals refresher before diving into best practices, check out our blog post, A Brief Introduction to Legal Accruals Management.

1. Work closely with your law firms…

While automating the collection of accruals comes with many benefits, Emelita shared that “one of the most important things to stress is that the information we get is only as good as the information given by our law firms.”

Fitbit relies on their law firms to give accurate data. Working closely with each firm becomes vital to ensure accurate numbers are calculated and submitted at the right times. Areas of training may include:

• Why accruals are important to your department (law firms want to be a good business partner so stressing why you care about accruals helps them care, too)
• How to calculate accruals and when to submit them
• How to submit accruals (especially important when using e-Billing)
• Feedback process to prevent bad habits from forming

If you’re not sure how to start the accruals conversation with your law firms, download this customizable training deck with the key areas legal departments need to focus on.

For those collecting accruals for the first time, Emelita mentioned that collecting only from your top firms may seem more approachable. However, if you automate the process, there’s no real reason to exclude any. When Fitbit implemented SimpleLegal’s legal operations platform, the process was so seamless, they began collecting accruals from all their law firms because little extra effort was needed.

An added benefit of the close relationship between Fitbit’s legal team and their law firms is that firms will respond with a 0 if there are no legal accruals. Emelita finds this really helpful because she has a confirmation that there’s nothing to accrue instead of wondering if the law firm forgot to submit their numbers.

Best practice: When it comes to accruals, investing the time and work upfront will make your job easier in the long-term.

2. …and follow up on a regular cadence!

After rolling out a more streamlined accruals collection process with SimpleLegal, Jill was thrilled that Veritas’ firms were submitting accruals on time. One firm in particular was extremely diligent about sending an accruals number, which made both the legal and accounting departments happy.

Unfortunately, the partner of this diligent firm held onto the bill and didn’t release it for several months. By the time the bill came in, it was 6 figures! With all the data stored in SimpleLegal, Jill had visibility into spend and could recreate the proper numbers for their auditor, but it was a good reminder that consistent check-ins with law firms are required to make sure everyone is on the same page.

Now, Jill and her team clearly communicate that if a law firm is going to provide an accrual number, they must invoice in the following month. A quick, yet careful look to make sure accruals match actuals and that the bills are submitted within a timely manner prevent mistakes from becoming billing catastrophes. Plus, it gives Veritas’ legal team another opportunity to check-in and strengthen their relationship with their law firms.

Best practice: When you automate accruals, you can’t just “set it and forget it.”

3. Establish a good working relationship with finance

If you collect accurate accruals, you’ll gain support from your finance team, but why stop there? At Veritas, Jill grants access of SimpleLegal to finance for increased visibility into their legal spend, and billing and accruals processes.

Jill has also identified a finance business partner who works closely with legal operations. Like many legal ops professionals, Jill admittedly does not have a finance background, so having a partner in finance is extremely helpful. As he becomes familiar with her departmental goals and spend practices, he’s better positioned to answer questions and provide more strategic insights. Each month, the two meet to go over:

• Accrual numbers
• Monthly legal budget
• Outside counsel spend
• Outliers in the data

An example of this beneficial partnership was when Veritas split off from their parent company, Symantec. During this time, outside counsel spend was through the roof. Accurate accruals and working closely with finance helped identify run rate items that Jill would have otherwise had no visibility into. Because these items would only be billed one time and booked right to the accounts, separating them would help her justify higher spend that wasn’t part of the normal legal budget and provide accurate forecasts for the following year.

Best practice: Establish a finance business partner and get them connected into your processes and e-Billing and spend management system.

4. Give yourself an accrual window

Finance wants to close the books on a certain day, so if you’re collecting accruals, you need to create an accrual window that:

• Gives your law firms time to collect their accrual numbers
• Gives your legal team time to review
• Gives your finance team time to review

By working backwards from the last day of the month, Emelita and her team determined what days they wanted SimpleLegal to send automated emails reminding their law firms to submit accruals. They calculated that the first accrual reminder email needed to be sent to their law firms 10 days before the end of the month, and they left a 2 day buffer before the last day as a safeguard. They were set up for success!

Six months later, Emelita had a meeting with finance and found out that period end dates for the company are floating, meaning the last day of the month isn’t necessarily period end. While law firms were submitting accruals on time from legal’s perspective, finance wasn’t always getting numbers in time to close out the month.

Building on points two and three above, Emelita noted that working closely with finance and law firms is a must. Get on a regular cadence with finance to make sure your accrual window is sufficient and that numbers are accurate. If there are issues, these meetings give you the opportunity to discuss them in detail. Emelita and her team now have their own calendar reminders to move the accrual submission dates at the end of each month, and use SimpleLegal to easily set different accrual collection schedules.

Best Practice: Don’t make assumptions about how finance operates – work with them on a regular cadence to understand their process.

5. Consider split period accruals collection

When you get an accruals number from your law firm, it’s helpful to understand if some of the estimate is from this current month and the work still ongoing, or if it is “older dollars” that the law firm hasn’t billed yet. While law firms should bill in a timely manner (and older or stale accruals should be zero), we know that doesn’t always happen!

When collecting accruals on an open matter, ask for two numbers for additional clarity: current unbilled and everything prior to that month. Splitting your accruals into two numbers helps identify when there might be a delta, and makes it easier for finance to look down the list of matters and identify where problems are instead of guessing.

Best practice: Ask for two numbers and make it easier for both you and your finance team to identify inaccurate unbilled estimates.

Here’s to Another Successful Legal Ops Conference

The stories from our legal operations guests and the inquisitive Q&A with the audience demonstrate the growing interest around accruals and their ability to help legal departments better manage and control their legal spend. If you’re ready to introduce or optimize accruals at your organization, our whitepaper, Your Complete Guide to Accruals Management, provides a great framework to get started.

Overall, we had a great time at ACC Legal Ops and enjoyed the collaborative environment. There was a noticeable desire among attendees to swap best practices and learn from industry peers, which is why we cannot wait to see what the upcoming ACC Annual Meeting in Austin, Texas has in store. Hope to see you there!