From SPENT Management to SPEND Management

Practical Ways to Cut Costs Now

Companies across all industries are scrutinizing costs like never before. Faced with the double whammy of reduced work and increasing pressure on fees, law firms are not exempt. When firms are thinking about difficult measures like cutting staff, controlling indirect spending represents a hidden, and in most firms, largely untapped reservoir of cost savings.

Close inspection of the systems, processes, and controls around indirect spend should be top of mind for law firm management, especially since they can deliver quick returns to the bottom line.

Embracing Spend Management Systems

Law firms can realize significant cost savings now by embracing spend management disciplines, best practices, and systems that have been in place in other industries for years. Spend management is all about reducing costs, enhancing corporate controls, and improving the visibility of indirect and non-payroll costs by streamlining procurement and accounts payable processes.

Here are five areas where spend management systems, geared to the specific needs of law firms, can make significant contributions to the bottom line.

1. Optimize Accounts Payable

Most spend management issues will surface in a law firm’s accounts payable department. For example, many firms don’t insist on an authorization signature or approval process before goods or services are purchased. Consequently, invoices turn up unannounced—after the firm has been fully committed and the money is spent. A/P then has to chase down the originator, determine if it is an internal charge or disbursement, and code it accordingly. Needless to say, this is extremely inefficient. Worse, there is no control over what is spent, exposing the firm to downstream processing issues, maverick spending, budget overages, and fraud.

Many A/P issues can be resolved by implementing an automated purchase/check request process utilizing workflow for approvals. Employees and administrators can select items or services for purchase online. Requests are percolated up to management electronically where they are approved online or via PDA.

Automating the front end of the process is critical to controlling costs. It prevents unauthorized spending, streamlines A/P processing, and more.

2. Eliminate Unnecessary Write-Offs

Nothing is more frustrating than writing off legitimate client expenses, yet many firms find themselves in this position. One cause can be the log jam of “mystery” invoices handled by A/P at the end of the month. Lost, miscoded, or delayed disbursement invoices can miss the billing cycle and, therefore, the billing window. Spend management systems eliminate this problem by identifying reimbursable costs and the associated client matter before a purchase is made. When the invoice arrives, the disbursement coding is automatically pulled through to the invoice. A/P can easily perform a match and expeditiously forward it for disbursement.

3. Enable Quick and Easy Budget Checking

As legal engagements have become more project based, budget tracking has grown in importance. Most firms operate blindly against budgets until month-end close. Spend management systems can check budgets before expenditures are committed and before invoices arrive. This lets partners know where they stand on an engagement at any time and prevents budget overages.

4. Improve Cost Visibility by Employee and Client Matter

Closely related to budget checking is the notion of accountability. Many firms have difficulty attributing costs accurately to specific client matters or employees. By implementing a formal authorization process, it becomes clear where expenses originate. Spend management systems also help by using coding mechanisms that ensure accounts are charged accurately and appropriately. Additionally, this saves accounting from having to research, re-code, or reclassify entries.

5. Leverage Aggregated Spend

In most law firms, purchasing is dispersed across the organization and fragmented across numerous suppliers. A well-deployed spend management system will consolidate all the firm’s spend activity to preferred suppliers. This allows the firm to leverage quantity discounts and preferred contracts, a major source of instant savings.

Spend management systems are right for the times. Closer inspection of indirect spending processes and some simple changes can provide firms with greater visibility and control over their costs, often resulting in significant savings.

For more information, please visit www.aderant.com.

Andrew Dawson of Aderant

Andrew Dawson of Aderant

About the author: Andrew Dawson has been involved with practice management systems and the professional services industry for more than 20 years. Mr. Dawson has worked in a variety of senior roles within ADERANT since joining the company in the mid 1990’s. His exposure to a wide range of functions within professional services firms allows Mr. Dawson to add technical and business expertise to evolving aspects of the challenges faced by the professional services market. Mr. Dawson holds a Bachelor’s of Science, advanced degree from the University of Saskatchewan. www.aderant.com.

~ by CDLB on May 27, 2009.

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