How To Approach Budgeting For Legal Departments In 2021

74% of legal operation executives ranked cost control their top priority in 2020. It was before the pandemic that decimated the global economy.

Consider all the changes in 2020. How many punches did your team have to take? Everyone was constantly adapting, so it was harder to think strategically. Reactionary decisions won't work in 2021.

Budgets will be scrutinized more closely after a year of uncertainty. So prepare for discussions with finance and other employees by looking ahead to the 2021 budget of your legal department.

Revisit your Business Continuity Program

You might have had a business plan for 2020. It was a simple, outdated manual that gave general instructions on how to recover from unforeseen disasters. However, no matter how comprehensive your plan was, it likely didn't provide the guidance you need to manage the long-term effects of a global epidemic.

Legal ops teams often represent the "business" side, and they may be responsible for planning for the following year. The legal team remotely and work with outside lawyers. Because the legal department handles sensitive data, all communications and documents must be kept private and secure.

Budgets will have to change as teams work remotely and with hybrid in-office/remote teams. While your business continuity plan may have been adequate for short-term disruptions to work, what about long-term changes? What technology and processes will you have to be able to work effectively in 2021?

It may be time to get rid of legacy systems and start investing in new legal tech. Although you may be cautious about big purchases or more changes, legacy system maintenance can eat up your IT budget and reduce your team's productivity. In addition, efficiency is essential when legal spending is under scrutiny. Therefore, it is necessary to assess how technology can help you manage documents, spending, reporting, and matters. A system that integrates seamlessly, automates workflows and has legal-specific features could improve your team's productivity.

A "rainy-day" fund may also be a prudent idea. Market conditions will continue to fluctuate, and budget allocations for legal departments will shrink. Everyone was shocked by what happened in 2020. Do not let 2021 get you off balance.

Re-examine How you gather and use data

Data-driven spending is essential. But is your data up for the challenge? You can begin to gain insights into spending patterns by evaluating your data at the beginning of the year.

Data can help you find savings opportunities and manage your spending. Have a look at the data you have and ask:

• How can high-volume, complex work be handled? Automations could save you time and money.
• Do discounts with other firms get negotiated and enforced
• What practice areas and matters are the prime targets for alternative fees arrangements?

Your data collection and analysis are not robust enough to answer these questions. Simple legal allows you to choose which metrics you want and then track them with an automated spend management platform. You can then use this information to make better business decisions.

Judge Napolitano, Workday's legal operations manager, uses Simple legal to do precisely that. Judge Napolitano states that data is both a qualitative and quantitative benefit of Simple legal. "We can gather information about vendor work performance, satisfaction scores, and invoicing timelines.

Collaborate to Determine Priorities and Find Solutions

Do not be afraid to talk to all parties outside counsel, vendors and finance, HR, compliance, and your legal ops as well as non-ops team members.

Law firms and legal ops should be partners. Your outside law firms are essential for your success. They rely on you to pay for work, so it makes sense to work as a team. Law firms can expect to make concessions; as chief legal officers are forced to cut their pay to keep their departments afloat. Ask your service providers and outside firms to offer volume discounts or even to freeze rates.

Another savings opportunity is extended payment terms. For example, if a company's payment terms average net 45, you might consider working with outside finance firms to get net 60 or 90 times.

Don't let negotiations fixed fees. You are still working together as partners. Make sure you present both the benefits. For example, instead of saying, "We need to give you a volume discounted, or we won't be able to work with you anymore," you might say, "We can guarantee $X quarterly spend for our firm if yours agree to a volume reduction at Y rate."

You can also brainstorm ideas with your team. For example, ask your legal ops staff what manual and admin tasks consume a lot of time. Also, ask which outside firms are a joy (or a pain!) to work. And what processes prevent team members from doing their best. For example, is it time-consuming to jump in and out of Outlook every few minutes to search for documents? An integration could speed that process.

Also, think beyond legal operations. Talk to lawyers about how they can save money on their specific processes. For example, someone close to a firm might design timekeepers to ensure that your department does not pay senior associate rates for work of lower quality.

Don't forget your business partners. Cross-functional collaboration is suitable for all employees. To discuss ideas, reach out to colleagues in finance, compliance, and IT. It shows that legal is open to working with other departments to improve efficiency and spend more.

Keep your legal team efficient with Simple Legal

Our platform provides a complete business continuity solution that includes spending management, reporting, analytics, vendor management, and matter management. Simple legal can accept invoices from any vendor in all formats, from PDFs to LEDES files. It can also track critical metrics automatically so that you have complete visibility into your legal spending.

Simple legal's budgeting functions make it easy to enter budget estimates for internal and external use and assign budgets at different levels, such as practice and master levels. Spend is a constant concern for legal departments. In a year with many budget challenges, it will be critical to justify that spending and prove the department's value.