Optimizing legal spend management: Three proven strategies for financial control

Legal and advisory expenses often represent a significant portion of a company's budget, yet many organizations struggle to manage these costs effectively. And when every dollar counts, optimizing legal spend is a crucial strategy for maintaining competitiveness and fiscal responsibility.

This post guides you through a comprehensive framework for legal spend management, centered around three key levers:

1. Strategic spend control
2. Proactive matter management
3. Intelligent invoice review

By integrating these into your legal operations, you can move from a reactive process to a proactive strategy for legal spend management. The result? A more efficient, effective, and yes, cost-friendly approach to legal services.

In the following sections, we'll break down each of these principles into bite-sized, actionable strategies. 

#1. Legal spend management lever: Strategic control

The first lever for effective legal spend management is strategic control. This approach harnesses data analysis, industry benchmarking, and skilled negotiation to optimize legal costs while improving service quality. Getting this right can deliver 10-25% savings on your outside legal spend–and these savings increase over time as you build better partnerships.

Key aspects of strategic control:

Data-driven decision-making: Utilize comprehensive data analysis to inform your legal spend strategy. This includes:
Tracking historical spend patterns (if you don’t have your historical data, we can help get it for you!).

• Benchmarking against industry standards using both historical and current data along with your organization’s unique insights.
• Understanding rates and gearing trends, and using this to set the right expectations with your firms.
• Using comprehensive data analysis to inform your legal spend strategy.

Negotiation strategies: Armed with data, engage in more effective negotiations with legal service providers:

• Implement agreed rate caps to ensure cost predictability
• Negotiate volume discounts and better rates for long-term or high-volume partnerships
• Consider alternative fee arrangements (AFAs) that align with specific project needs

Competitive bidding: Utilize multiple quotes and Requests for Proposals (RFPs) to ensure you're getting the best value from your law firms.
 

Performance metrics: Establish clear, measurable performance indicators for legal partners. These should include factors like efficiency, outcomes, and alignment with business objectives.

Key takeaway: Strategic control is about making smarter decisions with data and negotiation skills. It's a proactive approach that positions legal spend as a manageable aspect of business operations rather than an unpredictable cost center.

📘Further reading: How to prevent legal spend running over budget

#2. Legal spend management lever: Proactive matter management

The second lever in optimizing legal spend is proactive matter management. This approach shifts the focus from reactive cost control to proactively preventing overspend. By actively managing matters in progress, organizations can identify and address potential issues before they escalate into significant expenses. Saving costs and preventing overruns before costs have crystalized into an invoice is critical to achieving meaningful savings and protecting valuable relationships.

Key strategies for effective matter management:

Take out risk at the start: Implement a systematic approach to remove risks at the outset of each legal matter. This involves:

• Using your own data to agree on an appropriate firm and fee arrangement to suit the matter type and spend goals
• Requesting an estimate or detailed phase budget from your chosen firm to encourage cost consciousness and reduce the risk of overspend
• Setting clear expectations in your policies for how you expect firms to manage matters and budgets

Proactive budget management: Instead of waiting for invoices to arrive (and occasionally getting a heart attack when they are way over budget), automate the tracking of budgets throughout the lifecycle of a matter:

• Set clear budget expectations at the outset
• Implement real-time budget tracking tools to let you know if a matter is at risk of going over
• Require approval for any significant deviations from the agreed budget

Technology utilization: Leverage legal spend management technology to enhance matter management:

• Use spend management software for real-time tracking and reporting
• Track compliance with guidelines as the matter is developing
• Use data to course correct and collaborate with your firms when needed

To sum up: By focusing on these strategies, organizations can shift from a reactive stance of managing costs after they're incurred, to a proactive approach of mitigating risks before they translate into expenses. This not only helps control costs but also improves the overall quality and efficiency of legal services.

📘Further reading: ROI of legal spend management software: Is it worth the investment?

#3. Legal spend management lever: Intelligent invoice review

This process serves as the critical final checkpoint, and not the first line of defense, to ensure that the services rendered align with the expected value. Invoice review can be time-consuming, so automation is key. As law firms improve their invoicing, you will see the number of invoice disputes reduce.

Key strategies for more effective invoice review:

Implement and enforce outside counsel guidelines: Establish comprehensive guidelines that clearly define acceptable billing practices. These should include:

• Limiting block billing (where multiple tasks are billed as a single time entry)
• Non-billable time (such as duplicate work, or preparation of invoices)
• Set guidelines for expenses and disbursements

Use technology for billing hygiene: Leverage advanced e-billing systems and tools to:

• Automatically flag non-compliant entries
• Identify patterns of inefficiency or overcharging
• Compare invoices against budgets and matter progress
• Streamline the invoice process to reduce and eliminate the need for manual review

These technologies can significantly enhance the efficiency and accuracy of the review process.

Conduct regular billing audits: Implement a schedule of regular audits to:

• Identify trends in billing practices across firms and matters
• Ensure ongoing compliance with guidelines
• Uncover opportunities for process improvement or cost savings

Align invoicing with value metrics: Move beyond time-based billing by incorporating value-based metrics into the invoice review process. This might include:

• Assessing outcomes against predefined success criteria
• Evaluating efficiency ratios (e.g., time spent vs. complexity of task)
• Considering the strategic impact of the legal work on business objectives

Implement early payment incentives: Consider offering early payment discounts to encourage prompt and accurate invoice submission. This approach can:

• Improve cash flow management for both parties
• Reduce administrative burden associated with late or disputed invoices
• Strengthen relationships with key legal partners

Key takeaway: These steps ensure invoices truly reflect the value of services delivered. By using insights from invoice reviews to inform strategic spend control, companies can create a continuous improvement cycle. This feedback loop boosts financial efficiency, sharpens legal spend strategies, and strengthens relationships with legal service providers.

📘Further reading: Build stronger law firm partnerships through a modern approach to invoices

Now, we’ve looked at best practices. Let’s look at a practical application.

Real-world example: Marex cuts out 90% of the admin for legal teams (and more)

Marex is a NASDAQ listed (MRX) diversified global financial services platform, providing essential liquidity, market access and infrastructure services to clients in the energy, commodities and financial markets. With more than 35 offices, access to all major exchanges, and technology-powered data and advisory services.

The challenge

Due to the nature of litigation work budgeting for the year was challenging. There was a lot of manual work to forecast and project spend, relying on spreadsheets for WIP/Accruals, which were 3 months out of date. The FP&A team did not accrue legal costs and had no visibility to what was being spent in real-time. This led to challenges with Auditors which have become increasingly important as a publicly traded company.

The legal team were often asked for accounting details for the finance team and more probing details on what was spent on legal and why, from the CEO.

The solution

Apperio helped Marex’s legal team, finance team, and at the C-level, evolve from a legal spend collection tool into a critical forecasting and finance tool, also enjoyed by Marex’s Law Firm panel.

"Apperio gives us everything we need for monthly close, we can see clearly, fees, WIP, and invoices. It enables us to start month end a little earlier and to capture accurate data - very good and very efficient way to complete month end." – Zdenka Mala, Financial Planning Analyst

It’s not just about driving costs lower for Marex. Through real-time data, they can identify the top law firms by spend, and look at the trends to decide where they should move their spend to get the best value. One of the outcomes of this has been that if spend is increased, the law firms also provide more value, such as more services or training.

The results

Since implementing Apperio:

• 90% of legal time saved with finance self-serving for accrual and other data
• Delays in law firm invoices decreased by 30%
• The finance function significantly sped up their monthly accrual process
• Automated manual data aggregation from 10+ international law firms, saving time and resources
• Gained instant access to all historic data from all connected law firms
• Gained real-time insight into current and future spend, allowing for better planning and decision-making
• Audit time, risk, and cost has reduced by using accurate real-time accrual data

“I rely on Apperio very heavily. It gets me the right information at the right time without having to chase or wait for it. The fact that I get real-time visibility of all spend data allows me to review and report on it as and when required. The time-saving element is the most beneficial for me.” Says Nick Jones, Group Head of Legal at Marex.

📕Keen to learn more? Read the full Marex case study.

We’ve covered quite a few strategies so here’s a quick wrap-up. 👇

Mastering legal spend management: Key takeaways

There are three key ways to manage legal spend better:

1. Strategic spend control: Using data to make smarter decisions about legal costs
2. Proactive matter management: Keeping a close eye on ongoing legal work to avoid surprises
3. Intelligent invoice review: Checking bills carefully to ensure you're getting good value
    

By using these methods, companies can:

• ✅Save money and improve accuracy
• ✅Build better relationships with law firms
• ✅Make sure legal work supports business goals
• ✅Stay ahead of competitors

For example, Marex used Apperio to change how they handle legal costs. Instead of reacting to bills after they arrive, they now actively manage their legal spend.

As industries modernize processes, we can expect an acceleration of the use of clever tech. Armed with these best practices and smart solutions, businesses can finally gain control of legal spend. 

Keen to learn more about Apperio? Book a demo here today.