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

Are you struggling to keep your legal costs under control? You're not alone. Managing spend efficiently is crucial for law firms and in-house legal teams, regardless of size or industry. But here's the challenge: How do you know if investing in legal spend management software is worth it?

Let's focus on the facts. This blog will show you how tools like Apperio can improve your financial strategy and positively impact your bottom line. We'll cover:

• How you can save 10-18% of your external legal spend
• Real-world examples of ROI in action
• Practical ways to measure the value for your organization

Whether you're a CFO looking to optimize costs or a legal ops professional aiming to improve efficiency, you'll learn how legal spend management software can significantly enhance your operations.

Let’s begin with a quick run-through of the key benefits.

The benefits of legal spend management software

Are you tired of wrestling with spreadsheets to track legal costs, dealing with surprise invoices and frustrating overspend? Wondering if there's a better way to manage your legal budget? Legal spend management software might be the solution you're looking for.

Here's what you stand to gain:

Robust cost control

• Historical and current data to choose the right firm and the right fee
• Real-time control of in-progress matters to ensure the right value and prevent overspend
• Automated invoice checks to ensure you are paying with confidence
• Deep insight and benchmarking to ensure ongoing value

Streamlined operations

• Automate budget tracking and invoice processing
• Free up your team to focus on high-value tasks
• Increase productivity across your legal department

Enhanced financial visibility

• Get real-time insights into your legal spend, automating accruals processes
• Spot trends and anomalies quickly
• Make data-driven decisions with confidence

Improved budget management

• Forecast future spend more accurately
• Allocate resources more effectively
• Avoid unexpected budget overruns

Strategic advantage

• Use data and insight to optimize value
• Align legal spend with broader business goals
• Demonstrate the value of your legal department

As you integrate this software into your processes, you'll move away from a foundation of traditional processes—like using spreadsheets—to one with real-time tracking, benchmarking and more. In our legal spend management maturity curve, we discuss this in more detail—sharing how leading businesses use software to maximize efficiency.

Stage 1: Adhoc or manual tracking

• Spreadsheet-based manual tracking
• Inconsistent data collection and reporting
   

Stage 2: Process implementation

• More consistent and controlled spend
• Easier OCG compliance tracking
• Improved vendor management
• Better financial planning and control
   

Stage 3: Legal technology adoption

• Real-time legal spend visibility
• Improved compliance and control
• Enhanced decision-making capabilities
• Reduced manual errors and inefficiencies
   

Stage 4: Strategic optimization

• Enhanced strategic decision-making
• Maximized value from legal expenditures
• Increased transparency and accountability
• Stronger external counsel relationships
• Elevated internal relationships with finance and executive team
• Minimize audit risk and cost

You can learn more here: Legal spend management maturity: A quick look at our eBook

Measuring the true value of legal spend management software

Investing in legal spend management software is a big decision. Ideally, you need to know it's going to pay off. But how do you measure the return on investment (ROI) beyond just looking at the price tag? Let's look at key areas where this technology can deliver provable cost savings for your organization.

#1. Billing guideline checks🛑

• Automatically catch and prevent non-compliant line items
• Ensure invoices reflect agreed rates and terms
• Typical savings: 5% of total legal spend

#2. Strategic rate management 💸

• Implement rate inflation caps to control costs
• Leverage early payment discounts for additional savings
• Average benefit: 5% reduction in overall legal spend

#3. Volume-based discounts ➗

• Use consolidated data to negotiate volume discounts
• Negotiate preferential rates for frequently used services
• Potential savings: Up to 2% of total OC spend

#4. Data-driven negotiations 🤝

• Benchmark rates for specific types of legal work
• Negotiate from a position of strength with service providers
• Typical outcome: 20% reduction in costs for benchmarked work

#5. Proactive budget control 🔀

• Set precise budget thresholds and receive overspend alerts
• Avoid financial surprises and budget overruns
• Average improvement: 70% increase in budget accuracy

#6. Enhanced billing efficiency 📃

• Improve speed of approval workflows
• Open up early payment discounts 
• Typical result: 80% improvement in invoice efficiency 

#7. Faster billing cycles 🔄

• Minimize delays between work completion and time entry
• Improved financial practices and fewer surprise invoices
• Average improvement: 60% reduction in billing cycle time

Legal spend management software directly contributes to cost reduction and improved financial management by focusing on these specific, measurable aspects. Organizations typically report overall savings of 10-18% on their total legal spend within the first year of implementation.

💡Pro tip: To calculate your potential ROI, consider your current legal spend and apply these conservative estimates. The resulting figure often reveals substantial savings that justify the investment in this technology.

Keen to see how this plays out in real life? Let’s look at a case study…

Real-world example: How DCC manage 75% of all deals to come within 10% of the budgeted estimate

The ultimate aim of implementing any solution or service is to prove its worth. So, here’s a real example…
DCC plc, a FTSE 100 company, is a leading Irish international sales, marketing and support services group operating in 22 countries.

Headquartered in Dublin, the Group operates across three sectors: energy, healthcare and technology, employing over 16,000.

Challenges facing DCC

• Lack of transparency on WIP and accruals between law firms and internal teams.
• Unpredictability of legal spend & inability to effectively budget on M&A deals.
• Difficulty in providing real-time insight to internal stakeholders while maintaining good relationships with external law firms.
• Controlling decentralized legal spend, in regulated markets, across international borders.

How Apperio helps

Control spend: See WIPs and accruals in real-time, having full control.

• Visibility: View all spend data including WIP, accruals and budgets in one dashboard.
• Insights: Understand and gain clarity on what makes up your legal spend.
• Action: Take action based on real insight and avoid going over-budget on projects.

Drive efficiency: Automate manual processes and reporting, saving time.

• Automation: Automate data collection and invoice approval process and save time.
• Agility: Save time on reporting and gain instant insights for those business critical decisions.
• Credibility: Remove friction between internal stakeholders and external law firms and improve relationships.

The results?

Apperio dramatically increased M&A budget predictability for DCC, along with achieving the following KPIs:

• Required budget estimate for every legal matter;
• Every project to be completed within 10% of budgeted estimate.

“Historically, DCC could only challenge invoices on the basis of recollection of a matter and trawling through detailed narratives. Apperio puts the balance of power, in terms of information, on neutral ground, giving us real-time visibility of our work-in-progress (WIP) and allowing us to report on legal spending quickly and efficiently.” – Killian Kiely, Group Corporate Finance Director

The proven value of legal spend management software

Legal spend management software offers tangible benefits for law firms and in-house legal teams:

• Operational efficiency: Automate routine tasks and reduce administrative burdens
• Financial control: Gain real-time visibility into spending and improve budget accuracy
• Data-driven decisions: Use analytics to optimize resource allocation and negotiate better rates
• Risk mitigation: Enhance compliance and create clear audit trails

Our case studies demonstrate these benefits in action. Organizations using these tools have achieved significant cost savings, improved productivity, and enhanced their strategic decision-making capabilities.

The return on investment for legal spend management software extends beyond immediate cost reduction. It provides the insights and control needed to transform legal departments from cost centers to valuable business partners.

For help seeing how a solution like Apperio could improve legal spend management, get in touch.