When I talk with our clients or attend industry events, leaders from legal departments of all sizes tell me that their costs are rising. Lately, more of those in mid-sized legal departments have been following in the footsteps of larger companies and implementing Enterprise Legal Management (ELM) systems – with e-Billing and Matter Management at the core. When a legal department uses a mixture of disparate point solutions, or even manual processes like recording matter information in spreadsheets and managing invoices by hand, moving to an ELM system helps with cost containment, process improvement, and greater predictability.
All of these enhancements are driven by the insights that an e-Billing and Matter Management solution provides – insights that give legal leaders the tools they need to make informed decisions about all aspects of legal operations. Metrics that deliver this understanding are an important part of the early ELM experience. There are four core report metrics that any new ELM engagement at a mid-sized legal department should utilize:
Reporting on matter activity or status provides visibility into the department’s matter inventory and how that inventory is trending across various categories. Because it acts as a window into how efficiently the team is taking in new matters and working through them to closing, this is an effective metric for determining which areas may need additional attention.
If you see, for example, that a particular practice area or matter type has a growing inventory, it may indicate a problem that could be addressed by process or staffing changes. By contrast, if a specific attorney’s assigned matters tend to close more quickly than the average, they may be a good source of coaching for attorneys with slower closing rates and growing inventories.
The purpose of a report on current invoice status is to find out whether legal bills are generally making their way through the review process to payment without any significant slowdowns. This is important because bottlenecks can make it difficult for the company to predict its spending accurately and can jeopardize fast pay discounts.
It is best to run this report by practice area, by reviewer, and by firm as a way of pinpointing potential problems. Depending on the nature of the work being done, different practices areas may legitimately have invoices that move along at different paces and you should be aware of the averages. A reviewer whose invoices tend to move slowly may have an overwhelming workload. And firms whose invoices consistently take a long time in review may need guidance correcting some of their billing practices.
Net Matter Spend
Understanding which matters generate the highest costs is critical to minimizing legal spend. This type of report helps you to identify outliers – high-cost matters that take up more resources or generate higher bills than normal.
Practice area is a typical driver of matter cost. Complicated mergers and acquisitions work typically cost far more than simple residential real estate transactions, for example. But when a matter shows greater expense than you would expect of the practice area or law firm, you may be able to find a way to curtail the increased cost.
Spend by Open Invoice
This metric identifies the most expensive invoices in review. As with costly matters, being aware of particularly expensive invoices is integral to effective legal department management. With the help of this report, you can prioritize invoice review to be certain that particularly high bills are appropriately scrutinized during the review process. It also facilitates planning for large invoices that will soon be due for payment.
By building these metrics into your processes, you can ensure that the legal department starts to see tangible results from its ELM investment very quickly after implementation. The visibility they provide into the legal business will inform how the department continuously improves day-to-day operations. And it ensures that the decisions you make for individual matters, and for the department as a whole, are informed by reliable and actionable data.