How to Make the Most of a Small Legal Budget

The Association of Corporate Counsel defines “small” as an in-house legal team with no more than ten lawyers. Writing in its Value Challenge Practices for the Small Law Department guide, the organization listed a number of challenges these teams face in legal budget management and the pursuit of value. Chief among them: With fewer lawyers, small corporate in-house Legal Departments are crunched to focus on “business as usual” work, so it’s hard to devote time to big-picture budgeting and value alignment projects.

We certainly understand the validity of that predicament. However, as we approach a new budget year, it’s worth looking at a few low-fuss legal budgeting tactics that could have high impact in 2024. One place to start: What are the bigger corporate Legal Departments doing?

The Altman Weil chief legal officer survey shows a number of activities that in-house Legal Departments have pursued for better budget management. When broken down by size, there’s a sizeable gulf between smaller teams and large teams:

Small Legal Departments are also far less likely to receive price reductions from their outside firms. 78.4 percent of large legal teams said they received discounts, while 50.2 percent of smaller teams did.

On a related note, more than half (56.9 percent) of small in-house Legal Departments said they did not feel they had enough buying power to negotiate effectively with their law firms. Only a third of large legal teams felt the same.

Key takeaways: top tips to make the most of a smaller legal budget

Matter budgets

The disparity between small and large legal teams is smallest with regard to legal budgeting. Nearly 73 percent of small in-house teams require budgets for legal matters, while nearly 90 percent of large teams do. If you are among the 27 percent of small Legal Department members that is not asking for budgets for your major legal matters, then this is a small, but impactful action that you can take immediately.

Billing guidelines

Just over half of small Legal Departments provide guidelines to their law firms for billing, expenses and staffing, while almost all of large departments do. Having written parameters in place can curb out-of-control billing or inefficient staffing, like unsupervised junior associate research. Even better, implement billing guidelines through your invoice process to enforce the receipt of only invoices that comply. Tip: It's easy with a matter management software.

Alternative fee arrangements

In our blog, 'Vexed by budget uncertainty?', Legal Departments that use alternative fees have a higher probability of hitting their budget goals. You can see how to use basic department data to structure fixed fees in our blog.

Monitor your legal budget

Larger departments are more than twice as likely to review their outside spend. Nearly 80 percent of small Legal Departments are not examining this data, despite the fact it’s likely their largest expense category. A legal matter management software like Xakia can be used to control and manage legal budgets can make this fast and painless, but even a manual review of billing data is likely to yield actionable intel.

Buying power

As for buying power, don’t underestimate your leverage. In Altman Weil’s latest edition of Law Firms in Transition, 95.8 percent of managing partners said they believe that increased price competition will be a permanent trend in the marketplace. Law firms expect to compete on price. As the ACC states in Unless You Ask, an invaluable guide to outside counsel negotiations, “You are the urgency driver… You may not get everything you ask for. But unless you ask, you are almost guaranteed to get none of it.

Simple and affordable legal spend management software

To learn more about Xakia's spend management solution for legal departments, speak to the team today for a free demo. It takes only minutes to implement these and other time and cost saving steps - with an immediate return on investment!