Why Should You Consider Outsourcing Legal Invoice Review?

Published by Gary R. Markham on Jan 27, 2021

Chief financial officers (CFOs) are constantly under pressure to improve finances within their organizations. Many CFOs immediately look towards the legal department, assuming that a high amount of the cost emanating from that side of the business can be cut. This was demonstrated by the 2020 Association of Corporate Counsel (ACC) survey of chief legal officers (CLOs).

According to the survey, nearly one-third of CLOs are expecting increased outsourcing of legal operations. CFOs consider outsourcing to be a crucial element of streamlining operations, but attention needs to be given to reducing the cost impact of utilizing outside counsel.

One method to reduce legal spend is to track and reject non-complaint line items in bills from law firms using third-party legal invoice review services, with adjustments to invoices based on comprehensive billing guidelines set forth in SLAs for all engagements with outside counsel. This can reduce instances of overbilled attorney fees significantly. Additional considerations include implementing data analytics detailing spend metrics across your organization, coupled with rankings and comparisons of outside counsel performance, often included with a comprehensive legal invoice review service.

Rejection of outsourcing altogether is not really an option. Apart from being a business necessity, outsourcing is also a cost-effective alternative for some aspects of corporate legal operations. Both CFOs and CLOs agree that outsourcing works as a cornerstone of legal spend management.

However, most organizations regularly struggle with legal spend management complexities. Lack of cohesion between in-house legal and finance departments often causes issues.

Non-Existent Nexus Between In-House Legal & Finance Departments

Lack of legal invoice support for accounts payable systems have often perplexed finance departments. This may be due to legal invoices being far more detailed than invoices of any other kind, with billing codes, hefty task descriptions and so on.

In-house legal departments have to perform comprehensive analysis of legal invoices. This means going through every single line item to make sure overbilling is not an issue.

It is commonplace for in-house legal departments to be inundated with invoices to review and process. Manual review of these invoices is cumbersome and extremely prone to errors. Even still, it’s often seen as the only option due to reviewing invoices automatically not possible within commonly used accounts payable systems.

A way to ease the process is to outsource invoice reviews to a legal fee auditor, such as LSG, that automates the entire workflow of legal invoice review on your behalf with ~6-11% in annual legal spend savings. Skilled third-party legal invoice reviewers can take an invoice from receipt through review, adjustments, dispute resolution and finalization before submitting the legal invoice directly into AP for approval and payment.

This, in turn, can help bridge the gap between in-house legal and finance departments while also freeing up staff for more valuable work than reviewing legal invoices. In the example of LSG, expert attorneys with an average of 10 years post qualification experience are coupled with machine learning to review legal invoices. Machine learning does an initial review, flagging obvious errors and non-compliance, and human invoice reviewers then do a second-layer thorough review of each and every line item.

Conclusion

Outsourcing legal invoice review has become popular with many organizations. This in part due to the service generating immediate savings which can count in the millions of dollars yearly.

The integration of this service improves communication between in-house legal and finance departments. It also introduces greater transparency in the legal spend management process, and improves reporting and financial forecasting.

Legal invoice review services are necessary for organizations looking to reign in cost emanating from legal operations, and cutting costs by 6-11% without affecting quality of service will be attractive to any CFO or CLO.

Interested in learning more about legal invoice review? Get in touch with us!

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