Economic uncertainty is forcing businesses to take a hard look at spending including legal spend. In today’s Guest Post, Aaron Pierce, General Manager of LexisNexis CounselLink, talks about the results of the recent LexisNexis CounselLink 2020 Enterprise Legal Management Trends Report and analytical tools that are available and being used to manage legal spend. Law firms best be prepared to be scrutinized like never before. 



Legal departments are facing multiple challenges now, as the COVID pandemic continues and businesses across many sectors are struggling. 

With so much uncertainty in the economy, it is critical for legal departments to engage in meticulous financial management. Effectively managing costs and saving money wherever possible can help mitigate risk that may be coming in other areas of the business. Complete visibility into spend is what makes this possible. Without strong budgets and an ability to track every single dollar, in-house counsel would never know where they might have flexibility that they can take advantage of. By utilizing alternative fee arrangements, systems that provide insights and analytics into spend, strong benchmarking data, and creative billing solutions, legal departments can better position themselves to manage the current environment and whatever comes next. 


AFAs Reveal Corporate Counsel’s Shrewd Eye on Spending


Alternative fee arrangements (AFAs) are one area that can provide more predictability into legal spend. Clear insights and strong benchmarking data can help legal departments leverage AFAs more effectively.


AFAs are certainly one area that legal departments are already exploring. A recent analysis of 2019 charges billed by outside counsel reveals that 12.1% of matters this past year were billed under some form of alternative fee arrangement. That is an increase from 9.2% in 2017, according to the LexisNexis CounselLink 2020 Enterprise Legal Management Trends Report, which features year-over-year legal industry trends particularly related to billing rates and matter volume. The Trends Report insights are based on data derived from nearly $35 billion in legal spend comprised of almost seven million invoices and more than 1.7 million matters. In its seventh year, the report examines charges billed by outside counsel and provides insight into how legal departments are managing the pressure to trim outside counsel expenses. 


Commodity work has traditionally been the most likely to be billed under AFAs, and that remains true in 2020. The latest Trends Report found that finance, loans, and investments work accounted for the highest proportion of matters involving some form of AFA at 30%. That was followed by employment and labor matters at 25%. M&A represented the third most-popular practice area, with AFAs accounting for 19% of matters. This is up from 10% the previous year–a significant jump for such high-profile matters. 


Corporate counsel are pushing for AFA billing to gain more predictability in legal spend as they face persistent pressure to tightly manage outside costs.


This trend makes it clear that corporate counsel are pushing for AFA billing to gain more predictability in legal spend as they face persistent pressure to tightly manage outside costs. 


Gaining Insights into Legal Spend


While AFAs are one crucial tool to capturing savings and increasing predictability, there are other areas that can be mined as well. If your legal department isn’t using a system that provides for a big-picture view into spending trends, it’s time to look into one. Such a system will identify previously unnoticed insights that the legal department can leverage.

Key features of your billing system should include:

–Financial management insights, such as line-item detail of all invoices, that allow for better cost control.  

–Management views that allow you to collect, track, organize, and report on both internal and external work to boost cost effectiveness and productivity. 

–Vendor management insights to improve collaboration and retain the right form for the right matter.

–Analytics tools to help you leverage data to make better decisions. 

–Benchmarking data for other organizations to compare how you perform against your peers.


Explore Creative Solutions


It’s also important to look for solutions that are creative, flexible and can benefit both law firms and legal departments. That is particularly true during periods of economic uncertainty, when legal departments and law firms often have conflicting goals around payments. Legal departments can improve cash flow by instituting long payment terms for law firm invoices. Yet, law firms naturally prefer to receive payment as soon as possible. Today, there are tools such as CounselLink® FastTrack that can help legal departments save money while at the same time improving cash flow to their law firm partners. 


As the world settles into a new normal, legal departments must be data-driven organizations that provide and demonstrate greater value to the business. Expanding the use of AFAs and exploring other creative solutions will help effectively manage costs and help mitigate risk coming in other areas of the business. It is critical to both capture and analyze your own data, as well as benchmark against your peers to drive the best decisions that will allow you, your department and your business to compete in today’s economy.