Legal spend management strategy success is gauged through projected spending and actual spending. The aim is to keep these figures as close to one another as possible. Succeed and you’ll make your firm’s financial team that much happier while also making a positive impact on the bottom line that proves beneficial for the firm’s collective interest. Ideally, both actual spending and projected spending will be kept as low as possible. To be more specific, the goal is to keep both figures significantly below the yearly revenue.
Developing an accurate understanding of how your firm’s financial performance will be judged at the year’s end is important yet you might not understand the specific adjustments and tactics that will prove most helpful along your path toward financial success. The optimal metrics for monitoring are intermediate indicators that are intricately linked with success across posterity. Let’s take a look at the most important metrics used to predict legal spend management.
Compliance Rate in Terms of Billing Guidelines
Billing guideline compliance bolsters relationships with clients, reduces expense and serves as a testament to administrative efficiency. The billing guideline compliance rate is calculated by dividing the number of new invoices submitted that lack violations by the aggregate number of submitted invoices. The higher the rate, the more successful your legal spend management is. Creating formal billing guidelines is an essential step in controlling legal spend. This is a pragmatic and cogent means of quantifying how legal services are valued.
However, if you don’t consistently calculate the compliance rate and enforce compliance standards, the results will tail off in due time. Legal teams that achieve comparably high billing compliance rates among outside attorneys are that much better capable of communicating the value of their underlying principles. If your firm has especially strong ratings on this metric, it is an indication that you comprehend your client’s expectations and are capable on providing services of actual value.
Budgeting Rate at Matter Level
The budgeting rate for the matter level is determined by dividing the matters generated through a set budget by the aggregate number of created matters. If your law firm scores high on this metric with consistency, it shows your in-house attorneys are successful and also reveals they are not content with comparably broad budget tracking. Rather, success with this metric shows accountability and oversight move all the way to the micro level of law firm work. However, this metric will only provide insight if your legal team has worked for several internal stakeholders to analyze historical trends, predict future demand and collect data for benchmarking.
This metric also represents the quality of a law firm’s relationships. Firms that commit to budgeting in the context of matter level are likely to enjoy mutually beneficial relationships with clients. The proactive effort to maintain alignment heightens the chances of keeping the actual amount spent at or below the budgeted figure.
Average Time for Invoice Approval
The invoices transmitted to your law firm should be approved or denied in a timely manner. If your average time for invoice approval is comparably low, you’ll be held in higher regard by those who provide your firm with services, supplies, etc. This metric is calculated by averaging the length of time elapsed between the submission of invoices and their subsequent approval.
Invoices approved in a timely manner are an indication that your firm’s financial wing operates with efficiency. The metric also reveals whether partner firms are creating and transmitting invoices in full accordance with billing guidelines. Focus on improving your average time for invoice approval and you’ll find it is that much easier to maintain a rapport with current service providers and also develop relationships with other third-parties.