Increasingly, law departments must justify spend, show efficiency and demonstrate the value and savings to upper management just like other departments within a company. While accounts payable (A/P) software can report on basic spending categories, it is unable to track vital data that is necessary to manage and show the true value the legal department provides.
Reports from A/P software are incomplete and not granular enough; A/P software simply isn't up to the task. But modern software as a service (SaaS) legal solutions, such as Serengeti, allow legal invoice entry in 1998B LEDES format – the industry-wide standardized electronic format for legal invoices. When law firms and vendors submit their invoices in the LEDES format, the legal software automatically captures all of the useful data in a legal invoice, such as what was done, who did the work, what it cost, staffing levels and categories of expenses. This is data that simply cannot be captured by any A/P software.
A/P software also can miscategorize fees and expenses from invoices, often leaving the spend that it can report incomplete. Invoices in the mail, currently in the approval process or sitting in a stack waiting to be entered into the A/P system are not reportable.
Manual data entry into A/P systems also leads to inaccuracies as well as staff inefficiencies. With a legal SaaS solution, the bill is reportable as soon as it's submitted by a firm. Approved invoices are also automatically routed into A/P software, eliminating data entry mistakes. Companies that have multiple A/P systems, by virtue of international locations or mergers, further compound the reporting inaccuracies.
Dissecting legal spend is essential for a legal department to be able to comprehensively review, understand and report on spend and legal matters. Why? Because attorneys bill by the hour and bill expenses as they happen, which in turn means that in-house counsel must review all the tasks and expenses outside counsel has billed them for and determine whether the time it took for each task is reasonable. Very few other vendors bill this way. A legal SaaS solution allows in-house counsel to view and make revisions to these invoices directly in the system. The ability to scan and automatically flag items that violate the legal department’s expense guidelines so violations do not slip through and get paid is also something A/P software just cannot do.
Reports using the detailed data in LEDES invoices are invaluable tools for managing a legal department and cannot be created using only A/P software. These reports include spending year over year; spending to budget; spend categorized by business units, law firm, or matter type; average billing rates per attorney; and more. For example, a legal department also can show their value by reporting on reductions made to invoices, negotiated savings and reductions in percentage of legal spend to company revenue. A key element to managing outside spending, and something that can take a great deal of time if done manually, is managing law firms' hourly rates. SaaS software can track negotiated rates, and if those rates are violated, it will alert in-house counsel of that violation. Companies may also benchmark rates to see if what's being paid to outside counsel is in line with what other companies are paying, allowing in-house counsel to know if they’re overpaying outside counsel or if they’re getting a deal.
Additionally, a legal department SaaS solution can save time for everyone involved in the invoicing process, including the A/P department, through automated routing and tracking of approvals and streamlining approval processes. Quickly paying outside counsel not only builds a relationship of trust with a legal department’s firms, but it can also allow for the negotiation of early pay discounts, saving the department even more money.
Legal software also enables legal departments to connect directly to outside counsel, allowing both in-house and outside counsel to securely send and receive matter-specific information efficiently by providing matter management functionality. This functionality includes budget information, accruals, event alerts, document and contract management tools, and status reports – all of which are consolidated, tracked and reported on in one place.
Most likely, all legal departments using SaaS solutions have A/P software as well. While the invoice processing and reporting capabilities of most A/P software and non-legal invoice approval software may be sufficient for many business units within a company, a well-run legal department demands more. Granular, highly specific reports – as well as customizable approval and review processes, managing outside counsel's hourly rates, and the various other matter management tools – simply can't be replicated by A/P software or by non-legal invoice routing software for a legal department. Unfortunately, law departments using only an A/P system are wasting valuable time and money, which could directly go towards next year’s budget and the company's bottom line.
Patrick Johnson, J.D., is a Senior Marketer for Serengeti, a Thomson Reuters business.