Why real-time legal spend tracking is a game changer for private equity

In-house private equity teams must balance managing fast-paced M&A work with complex and long-running fund projects. With cost pressures increasing in 2024, it’s clear that the old way of managing legal spend is broken. When the first view you have of the work your law firms deliver is at the point of invoice, this is likely to become a point of friction. Too often, the focus becomes the final figure, and not on the value of the actual work.

What’s more, private equity firms also face an increasingly demanding regulatory and compliance environment. This requires better and more frequent reporting on spend at the fund level.

But, some firms have found a solution: real-time visibility of their legal spend.

Instead of waiting for invoices to land (often months into a new project), you can track progress and spend throughout the matter lifecycle. This means you stay ahead of costs and manage the matter proactively, instead of reacting later. You can see exactly what's happening, how much it costs, and how it aligns with your expectations of value.

The result? More agile and data-backed decisions, tighter cost controls, and enhanced performance. Plus, transparency and productivity allow for greater collaboration with internal finance teams and your external advisors.

Of course, this sounds intriguing. So, in this blog, we’ll cover why getting a handle on legal spend is so important right now, and why leading private equity teams are turning to spend management software—particularly for handling WIP and accruals.

The critical role of legal spend management in private equity

Legal and advisory spend is often one of the biggest costs a PE house needs to manage, and getting good value for your spend is crucial to deal and fund teams achieving the best results. So the way you collaborate with your advisors has a large impact at house, fund and deal level. Given the complexity of M&A and fund work, getting control over these legal costs is a major headache for in-house teams.

Bill Priestley, Chief Investment Partner at Epiris explains why; “You’d get a quote for the deal, work on the deal, and then invariably the cost at the end would be considerably more than the quote. You’d then have an old-fashioned discussion and haggle to make the fees more palatable, but it was always relatively unscientific and quite awkward.”

Unless, of course, you use the right tools.

Epiris began using Apperio in 2018 and has found this to be a crucial tool in helping internal investment and finance teams understand legal spend in greater detail and manage the external matters that are currently in progress.

As Bill puts it; “The key point is that there is a degree of clarity when both sides can see where the time is spent more precisely. Rather than having to say, ‘please send me reams and reams of information’, you can see it in Apperio almost immediately. And not just when the money’s already been spent. I think that really helps.”

Introducing smart legal spend management solutions

As Epiris found out, leveraging purpose-built solutions like legal spend management is the new approach, yet it’s one that not many private equity firms know exists.

What is legal spend management software? Legal spend management software is a central hub to track all areas of legal expenses, including invoices, budgets, trends, benchmarks and more. It means private equity firms can track and control their legal spend, ahead of the invoice.

Benefits of real-time insights

✅️ Understand what value you are getting from your law firms

✅️ Look beyond the invoice total to the rates and quality of staffing you are seeing

✅️ Improve relationships with internal and external stakeholders

✅️ Automatically track spend against budgets

✅️ Reduce manual effort on collation of data and creating reports

✅️ Faster decision-making and less friction throughout the billing process

It also means private equity firms can overcome issues with legacy spend management processes…

Challenges with traditional approaches

❌️ Relying on manual processes, retrospective, and simple accrual data in spreadsheets

❌️ Prone to data entry errors, delayed billing information, and invoice complexity

❌️ Lag between incurring expenses and receiving invoices leads to outdated information

❌️ Complicated budgeting and financial planning efforts

❌️ Lack of real-time visibility hinders the ability to assess the cost-effectiveness of legal providers

📘 Read more: How to evolve beyond using spreadsheets to track your legal spend

Now that we’ve covered legal spend management software more generally, let’s look at how it specifically impacts WIP and accruals. We’ll use our solution to explain:

6 ways real-time visibility of WIP & accruals transform legal spend management

One way leading private equity firms do this is through real-time visibility of all their legal spend. This transforms how private equity firms can manage, track, and optimize legal expenses.

Here are the key benefits of this approach. We’ve split these into three categories based on the priorities private equity firms face, right now.

Real-time visibility: The key to proactive compliance

#1: Automated monitoring of Work in Progress: Apperio's solution provides private equity firms with immediate access to real-time work-in-progress (WIP) data, enabling automated tracking against budgets and allowing them to proactively identify and address any billing discrepancies or compliance concerns before invoices are even generated.

#2: Collaborative issue resolution: By ensuring direct communication with legal service providers, Apperio facilitates a collaborative and value-based approach to resolving any issues related to outside counsel guidelines or billing rates ahead of the invoice. This ensures invoices are consistently accurate and compliant.

Streamlined invoice processing and reconciliation

#3: Intelligent invoice validation: Apperio's platform includes a robust final check that not only verifies the compliance and accuracy of invoices but also significantly accelerates the processing and reconciliation of legal spend, driving greater efficiency.

#4: Eliminating the need for adjustments: This proactive approach eliminates the requirement for rebates or short payments, helping private equity firms avoid the complexities and compliance risks associated with allocating rebates to funds.

Empowering compliance and transparency

#5: Automated reporting: Apperio's real-time, collaborative model drives automated reporting on house, deal, and fund work.

Strengthening financial partnerships

#6: Improved forecasting and budgeting: Transparency on WIP enables more accurate forecasting of accruals and legal spend, benefiting both parties.

This newfound insight and control enables a degree of control, compliance, and financial synergy that was previously unattainable. This shift marks a new era for legal spend management, allowing for greater visibility, oversight, and strategic alignment, as well as optimizing financial resources and mitigating risks.

Gaining a strategic edge with real-time legal spend management

With the right tools, private equity firms are keeping up with regulatory demands and setting new benchmarks for operational excellence. All of which enables a more collaborative, transparent, and compliant approach.

Looking ahead, leveraging technology to gain deeper insights into legal expenditures, including WIP and accruals, will be the key to success—not just for in-house teams, but for supporting broader business objectives.

Here are just a few ways Apperio can help:

✅Drive behavioral change towards more efficient working practices by setting meaningful KPIs that you can monitor regularly and accurately.

✅Focus on value-based conversations instead of querying invoices, to strengthen your relationships with outside counsel.

✅Drill down and report consistently on spend by practice area, department, law firm, fee-earner, project, region and more.

Gain insight into how outsourced legal work is progressing and take timely course-correcting action to avoid surprise cost overruns, with real-time visibility of matters.

Keen to see how else we can help? Take a look at customer success stories here. Or, dive straight in and book a demo of our legal spend management software.