There are three main ways a budget can improve the efficiency of a legal department: In addition, the process of working on your budget means that you have the evidence (in the form of historical and projected expenses) to negotiate more legal resources with the higher powers, which are finance and executives. Showing the expenses of an activity versus the cost of hiring a new internal resource to do the same job can be a compelling argument. 2. Create your budget template – design a template and run it from the finance department to confirm that they are happy with the budget provided this way (you can get started with our free budget template here) To stay on top of things and deal with the unexpected, companies must first move away from traditional budget schemes and develop new ones. Second, all companies should focus on stress tests to see if they are able to cope with an economic crisis. Thirdly, businesses should benefit more than ever from budgetary flexibility. A flexible budget helps you track your expenses and adjust them monthly. When preparing your budget, you can identify funding gaps. Even if it`s just a small amount, it`s important to adjust the budget or your goals so that they`re aligned. Otherwise, you risk inadequate performance or excessive spending and consequences. To keep track of all your planned expenses and income, you can use a premium solution like QuickBooks Online or something as simple and free as an Excel template or Google Sheets. There`s a great free template in the Google Sheets template gallery for an annual business budget. I then like to write on a whiteboard (or table) my main categories: litigation, employment, intellectual property, business, corporate secretary, real estate, privacy, regulation and compliance, etc., and start typing numbers for each area based on my analysis of the above.
And I`m asking my team – especially those who manage outside lawyers – to step in my office and help me review and refine my numbers. I do something similar for my «essentials» (see paragraph 6 below). When I`m done, I`ll have a pretty good estimate of our legal fees for next year (even if next year is months away). Budget season can be a bit stressful. As a result, many budgets of the legal service are arbitrarily put together. Those who see the most success are those who create their budget as part of their roadmap and legal goals. Do you need meeting rooms and accessories such as whiteboards and handouts? If so, you need to estimate the price of your nonprofit budget. First, estimate the costs in the context of what is happening as planned. However, it is a good idea to include alternative scenario-specific budgets to sow the seeds of future budget needs and adjustments if a particular scenario occurs. To do this, ask yourself «What if?» and plan a series of scenarios that could actually happen (don`t waste time planning unlikely scenarios).
Divide it into your travel budget. Provide separate categories for car mileage, airline tickets, business meals, etc. As with any good legal document, there is always a caveat: each law firm`s budget is very different. You should also keep in mind that your colleagues in finance may not understand how the legal function works. Therefore, you should take the time to explain things to them and find out why a certain legal activity spends too much. You need a budget for your nonprofit organization or nonprofit program. So you want to identify your income and expenses. How often you should check how well you`re following your budget, it`s a good idea to evaluate each month after collecting all your bills when you started. This will let you know if you need to adjust your forecasts or document expenses you haven`t considered. Not everything in your budget is predictable.
In fact, variable costs may arise? Variable costs do not have fixed prices every month. 4. Subscriptions – the cost of publications or regular services such as legal media 7. Reconfigure plans based on approved budget – If you don`t secure your entire requested budget, you`ll need to reassess the ambitions of the legal department and change priorities in a practical way. In addition, you need to review your spending on external consultants and determine if there is additional work that you can move in-house, either using the existing team or if the numbers add up by adding a new person. If you think it makes sense to add a leader to the department, be sure to «show the math» to finance and others who need to approve an increase in staff. Typically, this involves showing a history of legal expenses in a particular area and then showing the cost of hiring someone to do that work in-house. When calculating costs, be sure to include an employee`s total cost versus pure salary. There can be a big difference in these numbers when you add benefits, travel, cash, payroll taxes, etc. to salary costs.
It is also advisable to pay attention to seasonality in the files. You may find that you have more work in some months and less in others, depending on your areas of practice. In this case, it`s handy to have a budget that estimates your costs throughout the year so you can focus on the big picture. Start your budget by preparing a spreadsheet broken down by month. Now, you`ll do your best to predict how much revenue you`re expecting and how much you`ll spend on business expenses. Once you`ve broken down all the expenses, the next step is to project your expected earnings honestly and accurately. This can be considered a mapping exercise, as a budget should be your guide to building a successful law firm. ✔ The Legal Budgeting Process: A Potential Tool to Minimize Pain In either case, here`s a handy list of 20 expense items to consider when creating a nonprofit spending budget. Even if someone else creates the final budget, reviewing this list can ensure that nothing is missed.
One example is trademark and copyright research. Let us assume that the legal department is currently bearing the cost of this work. A budget that estimates the time and cost required for this work could lead to several good results, including shifting relevant costs to the marketing department and a policy that requires marketers to submit shorter, more prioritized lists of brand names – which would reduce attorney hours and external expenses for these tasks. Creating an annual budget identifies important details of your department, including how it works and how you can better achieve short- and long-term strategic plans. Budgeting allows a legal department to anticipate future challenges and prepare for significant cost increases, which helps better align your department`s specific goals with those of the entire organization. The last few years have been difficult. Many companies had to improvise on the road because plans and budgets didn`t work in a crisis environment. The true value of risk management has never been clearer. Unfortunately, the Covid-19 crisis still forces us to live in uncertainty, which puts additional pressure on financial and legal departments when preparing the 2023 annual budgets. 8.
Regularly monitor progress – establish regular budget audits to ensure objectives are being met in accordance with budget (and track reasons for discrepancies between budget and actual spending). Here you document expected donation items and volunteer work. Each type needs a description and an amount. Check the Internet for current prices. In this article, you`ll learn more about in-kind benefits and things you may not have considered. 6. Operating allowances – the legal department`s share of broader overheads, such as rent and utilities (coordinate this with the finance department) Well, there you have it. The «Sterling Miller Legal Budgeting 101» course.
My journey is certainly not the only way to prepare an annual budget, and the overall key is to work closely with your finance team to make sure you understand exactly what they want you to do in terms of planning. Anyway, after a lot of work (with the help of my team) and a bunch of dry markers, I sent my budget to the finance department. Now I`m just going to sit back, relax and wait to be disappointed. It`s good to be back! Budgeting also gives you a more accurate perspective on the cost of external consultants, typically the second largest position in your department. Identifying the most profitable third-party law firms can help you direct more business to them. You`ll be better informed when negotiating pricing and volume discounts, and you`ll be better able to hold external consultants accountable if they go over budget or don`t follow billing guidelines. No matter how much money you currently have, what field of business you`re in, or how long you`ve been practicing, you`ll need a budget to help your business succeed. The basics of a law firm`s budget include start-up costs, recurring subscriptions, and projected revenue. 11. Project-related costs – costs arising from the work of the legal department, such as translations or trademark registration, intellectual property, litigation, etc.
(be careful though – this does not necessarily always have to come from the budget of the legal department) 8. Remove projects and special costs from the legal budget. Don`t assume that all legal fees should be borne directly by the legal budget.