How to approach legal department budgeting in 2021

In 2020, 74% of legal operations executives named cost control as a top priority. And that was before the pandemic wreaked havoc on the global economy.

Think back to all the changes that happened in 2020 and how many punches your team simply had to roll with. Last year, everyone was adapting, so there was less time and less energy left to think strategically. But in 2021, reactionary decisions won’t cut it.

After a year of uncertainty, budgets will be under extra scrutiny. Be prepared for conversations with finance and the rest of the company by thinking proactively about your legal department’s 2021 budget.

Revisit Your Business Continuity Plan

Going into 2020, you might have had a business continuity plan — that dusty, forgotten manual with broad descriptions of how to recover from vague disasters. But no matter how thorough that plan was, it probably doesn’t contain the guidance you’ll need to deal with the long-lasting effects of a global pandemic.

Legal ops teams often represent the “business” side of legal and may be tasked with planning for the upcoming year. The legal team will need plans to ensure that all work (including with outside law firms) can be done remotely as well as in-office. And because the legal department deals with a lot of sensitive data, all communication and documents have to remain private and secure.

As teams continue to work remotely or with hybrid remote/in-office teams, budgets will need to adapt as well. Your old business continuity plan might have covered short-term work disruptions, but what about long-term changes to the status quo? Will your current technology and processes allow you to work efficiently in 2021?

Now may be the time to move away from legacy systems and invest in upgraded legal tech. You may be wary of big purchases and more changes, but legacy system maintenance eats up your IT budget, and disjointed systems kill your team’s productivity. With legal spend going under a microscope, efficiency is crucial. Take the time to evaluate how your technology helps you manage matters, documents, spend, and reporting. Would an upgraded system with seamless integrations, automated workflows, and legal-specific features improve your team’s productivity?

It may be prudent to create a “rainy day” fund as well. As market conditions continue to fluctuate, and legal department budgets shrink, spend and budget allocation will be unpredictable. What happened in 2020 caught everyone off guard. Don’t let 2021 throw you off balance, too.

Reevaluate How You Gather and Use Data

Data-driven spending is always important, but is your data up to the task? The beginning of the year is an optimal time to evaluate your data — both the quantity and quality — so you can start gaining insights into spending patterns.

Data can help you identify savings opportunities and control spend. Take a look at your data and ask:

• How is high-volume, low-complexity work being handled? Could automations save time and money?
• Are discounts with outside firms being negotiated and enforced?
• Which practice areas or matters are prime targets for alternative fee arrangements?

If your data can’t answer those questions, your data gathering and analyses aren’t robust enough. With a spend management platform like SimpleLegal, you can decide which metrics you want to monitor and track them automatically. Then, you can use that information to make more informed business decisions.

Greg Bennett, legal operations manager at Workday, relies on SimpleLegal for exactly that. “For us, data is both a quantitative and qualitative benefit of using SimpleLegal,” Bennett says. “We’re able to collect information on vendor work performance, satisfaction scores, invoicing timelines, and more.”

Collaborate To Determine Priorities and Find Solutions

Don’t shy away from talking to everyone involved —outside counsel, vendors, finance, HR, compliance, and your legal ops and non-ops team members.

Legal ops and law firms should work together as partners. You can’t accomplish much without your outside law firms, and they rely on you for paying work, so it only makes sense to work together as a team. With chief legal officers taking pay cuts to keep their departments afloat, law firms are expected to make concessions as well. Don’t be afraid to ask your outside firms and other service providers to consider volume discounts or at least freeze their rates.

Extended payments terms are another savings opportunity. For example, if a company’s payment terms are normally net 45, try working with finance and outside firms to move towards net 60 or net 90 terms.

You can also discuss setting flat fees for certain types of work, such as filing for patents. But don’t make negotiations all about you. Be sure to present the benefits for both sides — you are working as partners, after all. So instead of saying, “We need you to give us a volume discount or we can’t work with you anymore,” you could say, “We can guarantee $X in quarterly spend for your firm if you agree to a volume discount at Y rate.”

Brainstorm ideas with your team, too. Ask your legal ops employees what manual or admin tasks take up a lot of time, which outside firms are a pleasure (or a pain) to work with, and what processes keep team members from doing their best work. For instance, does jumping in and out of Outlook to find documents take up a lot of time? Could an integration speed up that process?

Look beyond legal operations as well. Talk to legal practitioners about identifying savings specific to their processes. For example, someone who works closely with a certain firm could design tiers of timekeepers to ensure that your department doesn’t end up paying senior associate rates for lower-level work.

And don’t forget about your business partners. Working cross-functionally is good for the entire organization. Reach out to colleagues from finance, compliance, IT, and HR to talk through ideas. It shows other teams that legal is interested in working together to spend and work more efficiently.

Keep Your Legal Team Operating Efficiently with SimpleLegal

Our platform offers a business-continuity solution complete with spend management, reporting and analytics, vendor management, matter management, and more. Not only can SimpleLegal accommodate invoices from any vendor, including formats ranging from LEDES files to PDFs, but it can also automatically track key metrics so you always have full visibility into your legal spend.

SimpleLegal’s robust budgeting functions allow you to enter internal and external budget estimates and assign budgets at various levels, such as matter-level or practice-level allocation. Legal departments have always worried about spend. But in a year that will surely carry over many budget challenges, justifying that spend and proving the value of the legal department will be crucial.

Sign up for a demo to see how the SimpleLegal platform can give you better control over your legal budget.