These are legal departments of all sizes; from two to over two hundred, those which are global in reach to those who operate in specific regions.
Not-for-profits, huge international conglomerates, government entities; yes, I’ve seen just about shape and size.
Without putting any one into the proverbial pigeon hole I thought I’d jot down some notes to share on the common things these corporate legal departments do to get a handle on their legal spend.
Six Legal Spend Governance Considerations
- Evaluate the resources in your company you already have available to you for consolidating information. The tools are all around you. Your accounts payable department has codes that help them streamline payments to your outside counsel and vendors. The team that counts numbers on the corporate general ledger also uses codes to classify expenses. Getting a cursory knowledge of these coding systems will give you a leg-up on organizing expenditures.
- Catalog the information according to legal and business classifications. Write down five to ten major categories of the matters (or ‘projects’) your legal department works on. Those will prove the first tier of a legal hierarchy. The second tier of the legal hierarchy will be modifiers of the first tier. For example “Contract” would be a tier one item with “Real Estate”, “Employment”, Supplier” being words to segregate the types of contracts your legal department works on. Do the same for business hierarchies, set one to the corporate departments (remember General Ledger stuff above?) and set yet another to the product and service lines your company provides.
- Identify who in your legal department is responsible for overseeing spend at the lowest possible level. Typically this is the lead attorney or paralegal you place in charge of specific matters. Charge them with placing the classifications spoken of above on their matters and projects they have been asked to manage. As invoices are processed against specific matters the classifications will automatically be applied.
- Employ a reporting tool. Now that you are applying classifications to invoices you will be able to begin to dissect how much time and money are being devoted to any give group within the classifications you establish. Rather than getting the spend details after the fact you’ll be able to pull the numbers at a moment’s notice and even begin to be able to forecast expenditures.
- Automate as much of the process as you possibly can. Use a management tool that uses a database that is configurable to your business. Use the standardized Legal Electronic Data Exchange Standard (LEDES) for outside counsel submit their invoices. The invoices will automatically go into your management tool for processing but will also be classified with literally no action required by your staff.
- Establish firm billing guidelines. Decide on global billing rules for all outside counsel who do work for your corporation. Take the driver seat and stop negotiating for every little concession.
Jim Harris is Vice President of Application Development at LT Online Corporation, makers of LAWTRAC. A corporation matter management system with over 26 years of maturity.
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