Legal Briefing

Unlocking the hidden value in business processes

The In-House Lawyer Logo

Opinion | 01 September 2015

Nearly every business uses Excel for straightforward accounting tasks, but for corporate legal departments dealing with multiple matters involving external legal service providers, specialised budgeting software brings significant business benefits. Although Excel is a useful repository for financial information and facilitates financial analysis, this requires manual collecting, inputting and updating data. Accurate financial planning, reporting and forecasting require relevant, timely and complete information. When it comes to legal services provision, much of this information is held by external law firms and Excel offers no easy way to track, manage and compare outsourced services and suppliers. Furthermore, once a system has been set up in Excel, it is not easily changed or reconfigured.

Consistency is another challenge. Although suppliers may (be required to) submit accounts and invoices electronically, without an e-billing system these may be presented in different formats and incorporate a variety of variables and financial breakdowns. And when it comes to administration, re-keying all the data into Excel is a time-consuming, repetitive task that creates potential for human error.

An e-billing system which offers flexibility, scalability and consistency, in terms of 
data sources, users, formatting and analysis, and the ability to track matters and how they are charged for helps corporate legal departments uncover the value in business processes, giving GCs, finance directors and CEOs deeper insights and a better understanding of the company’s legal requirements and how these are being delivered.

Software as a service or cloud-based e-billing systems provide a comprehensive view of all the company’s legal work and the allocation of their legal budget. Online solutions are scalable in terms of information sources, types and users. They connect everyone involved in the legal function, inside and outside the company. A major advantage is that users with the appropriate permissions can access live data online at any time, from any platform or location. Specialised legal budgeting software like Serengeti Tracker enables firms to submit their accounts directly from their own financial systems in a Legal Electronic Data Exchange Standard (LEDES) compatible format – requiring no additional data input. As all panel firms submit their accounts in the same format, it is easier to break down and analyse the data.

BRINGING TOGETHER PROJECT 
AND COST MANAGEMENT

Serengeti’s dashboard brings together project and cost management as it provides an overview of the company’s entire legal work – and budgets – enabling legal departments to monitor expenditure at a strategic level and quickly and easily drill down into the detail. Accurate, up-to-date information supports real-time budgetary control, continuous process improvement and decision making. A simple process like submitting invoices gives corporate legal departments both the big picture and a deeper understanding into which of their panel firms offer the best value for money and provides accurate guidance for selecting firms for legal panels and specialist assignments. A clean audit trail provides hard data to support decision making.

Consolidation and changes in the legal services market mean GCs have more options to choose from and even high-value legal service providers are now operating in a buyer’s market, where the GC calls the shots. Furthermore, companies are expanding their legal teams, although they still outsource a significant amount of work to external advisers. Pricing remains an important consideration in legal services procurement and alternative fee arrangements (AFAs) continue to replace hourly billing as clients look for cost transparency and predictability. However, GCs consider it most important that the company’s external legal advisers understand the business – it is a law firm’s synergy with the business that makes it harder to replace.

Pricing is increasingly related to another buzzword – legal project management, with more firms applying Lean Six Sigma and other process and project management techniques to their operations to enable them to maintain their margins while pricing their services competitively. This move is welcomed by GCs from world-class companies whose key strategic role has influenced how they run the legal function and the expectations they have of the firms they instruct.

Process efficiency – and process design and improvement – has been a hot topic for law firm managers and technologists for some considerable time. Professor Richard Susskind has long focused his predictions on the need for law firms to provide ‘more for less’, but as the global economy recovers, corporate counsel are concentrating on value rather than price, particularly in respect of ‘bet the company’ transactions and litigation.

The right e-billing system enables the corporate legal department to run like a business. Although the in-house legal function is often comparable with a small or mid-size law firm, it is a key part of the business and answerable to the board. So it is helpful if the GC applies metrics to guide and justify decisions and actions and present them in a business-focused way.

SUPPORTING MANAGEMENT DECISIONS

As legal services procurement is increasingly guided by procurement standards and benchmarks rather than relying solely on relationships, it is important to analyse billing against fee arrangements and budgets while monitoring key performance indicators. Drilling down into the details shows why some firms may be charging more than others for what appears to be the same service and helps the in-house department decide which firm is best suited to each case.

Matter tracking supports budget setting and work allocation, enabling GCs to analyse the company’s legal spend and determine which work to retain in-house and which to outsource and which external firms to instruct on particular matters. Because e-billing operates in real time, it can be used to analyse and predict outcomes in a way that supports decision making – ie data relating to similar cases helps to predict costs, so specialist budgeting supports predictive analytics which are becoming more prevalent as businesses learn to predict the cost and outcome of transactions and disputes. All this information facilitates accurate financial projections of future legal spend as it identifies patterns, both in relation to expenditure and in relation to the type of matters being handled. This supports the company’s overall financial planning in a way that would not be feasible using a manual system like Excel as the figures are never quite up to date.

A BRIDGE BETWEEN CORPORATE 
LEGAL TEAMS AND EXTERNAL FIRMS

GCs have commented that firms are often uncomfortable about asking for feedback and have insufficient focus on solving business issues and identifying clients’ expectations. It has been suggested that this disconnect is partly because companies measure by output, ie by results, while lawyers have historically been measured by input ie by time. Alternative fee arrangements are changing this and closer examination of billing data helps law firms and their clients manage expectations and priorities. Here Serengeti Tracker becomes a collaborative tool, a bridge between corporate legal teams and their external firms, facilitating collaboration and supporting decision making.

EVERYONE IS ON THE SAME SYSTEM

It helps to have everyone on the same system. Collaborative relationships around legal service provisions are not just between lawyers and GCs. Decision-making is moving down organisations and the connection is often at the technical level too, with law firm CFOs and CIOs working with their clients’ legal operations directors on pitches, helping to identify and deliver on requirements. Although some forward thinking firms are doing this already, it is not happening enough. Furthermore, collaboration between law firms on the same panel is increasingly prevalent, particularly due to the tendency among larger companies to deconstruct their legal work and instruct specialist legal services providers (law firms and alternative business structures) to handle different types of work – ie an M&A transaction might involve a transactional firm, an employment specialist and an intellectual property specialist.

A WINDOW INTO THE BUSINESS

Although e-billing data makes it easy for GCs and their teams to review and compare the pricing and performance of external law firms and other legal services providers, and to set pricing benchmarks for future work, it also provides valuable strategic insights for the rest of the business as a company’s legal spend will often reflect the nature of its business operations beyond those of its legal department. For example, a company might be involved in a large number of claims, disputes or M&A transactions that highlight its business and risk profile and determine or at least influence its future strategic direction. In this way e-billing data helps to unlock additional value from the company’s legal function and enhance its strategic influence.

Sophisticated e-billing systems offer corporate legal departments much more than financial management. They have become a tool for collaboration and for decision making, developing and supporting relationships between corporate legal departments and their various external legal suppliers and between panel firms working on the same matter. Importantly, they give the GC an extra window into the business that strengthens the legal function’s strategic role.

Thomson Reuters provide legal solutions for
 in-house counsel and the legal profession
 as a whole. To hear more about Serengeti
 Tracker; our legal department management
 system, or to arrange a demonstration of
 the service please contact:

Tel: +44(0)20 7542 9845

E-mail: serengeti.uk@thomsonreuters.com.

serengetilaw.com/international/uk.