The Fundamental Differences of Legal Spend Management (Part 3)

Spend Matters is pleased to welcome a guest series of posts exploring spend management in the legal sector by Jeff Hodge, executive director at doeLEGAL. This is the last post in the series. Click here for the first and second parts.

Because of the operational efficiencies limited by the absence of detailed data in a generalized e-billing world, corporate legal departments are deciding to leverage their legal spend management implementations to automate more and more of the routine activity that was previously left to attorneys and other legal professionals. Using the detail of the legal invoice, legal spend management systems are automatically adjusting, approving and rejecting invoices on their client's behalf. This just isn't possible through employing summary-level e-billing tools available from horizontal spend management providers. Below are a few of the examples of automation enabled by legal invoice detailed data:

  • If the rate charged for a task is in excess of the agreed rate, automatically adjust the rate in the invoice, show that adjustment during review and allow managing attorneys to allow the higher rate or accept the auto-adjustment
  • Our company considers electronic research as overhead and doesn't pay for it. Look for charges for electronic research and automatically disallow such charges.
  • We trust our law firm panel. If an invoice is received for less than $5,000 and it is not a litigation matter, automatically approve the invoice for payment
  • We have agreed on a fixed rate for all intellectual property matters of type X. If we are invoiced for a type X matter and the charge is at or less than the agreed charges, automatically approve the invoice.

Again, these just a few examples of operational efficiencies enabled by legal spend management systems -- not possible using the more generalized spend management approach used by many procurement organizations. The complexity of the logic used to automate business processes continues to advance and is limited only by the detail of the data available and the creativity of legal departments and their legal spend management providers. Increasingly this straight-through processing (STP) of invoices is being used to leverage internal staff and more efficiently manage outside counsel.

How can the data be used beyond validations and automation? The question is best answered through examples. Below is a very simple example of a few of the most basic reports and analysis generated from legal invoices that are not possible from horizontal spend management applications. These reports are simply not available in a more generalized e-billing system because the data just isn't available:

  • Legal fees and/or expenses by matter type (litigation, M&A, employment, etc.)
  • Legal fees and/or expenses by workgroup
  • Hours spent by a firm for a matter
  • Hours spent by individual timekeepers or timekeeper types
  • Fees, expenses and hours by matter phase (E.g. Discovery, appeal, etc.)
  • Invoice adjustments by adjustment type (E.g. unapproved work, etc.)
  • Total spend by legal department attorney for all employment matters

These are just a few of the kinds of very basic reporting and analysis that are available from the data inside of a legal invoice. But corporate legal departments are going much further and much deeper. Generalized e-billing and spend management applications and services are delivering tremendous advantage to their clients. The more invoices such systems handle the more value they deliver. These systems save purchasing and accounting departments a great deal of money and drive tremendous efficiencies to purchasers of commodity goods and services. But such systems are inherently limited by the data they work with and simply do not and cannot properly serve the needs of most corporate legal departments.

Spend Matters would like to thank Jeff for his contribution.

- Jeff Hodge, Executive Director, Corporate, doeLEGAL

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