A Strategic Approach to Legal Budgeting
For many in-house legal teams, budgeting season feels less like strategy and more like educated guesswork. You're asked to project spend, justify headcount, and plan for a year’s worth of legal complexity, often with a spreadsheet, a few assumptions, and not much else.
But, as you well know, legal spend is hard to predict. Matters are unpredictable. Rate increases are opaque and surprise invoices seem inevitable. Many teams just fall back on last year’s top line numbers, maybe adding a little padding “just in case.”
But it there is another way. With the right data and approach, legal leaders can forecast with confidence, earn credibility with finance, and finally get proactive about spend.
What Most Teams Get Wrong
They rely only on last year’s total without understanding why spend was high (or low).
They ignore matter-level data and fail to segment by type, risk, or business unit.
They don’t structure their data, so can’t crisply explain budget vs actual variances
Spend History Can Be Turned Into Forecasting Power
Your historical billing data is more than a record, it’s a roadmap.
With proper categorization and analysis, you can:
Identify baseline costs for repeatable matters (employment, IP, contracts)
Spot cost drivers: which firms, timekeepers, or phases spike spend
Create smarter assumptions around variable or high-risk categories (litigation, M&A)
The key is structuring the data: firm, matter, category, business unit, time period.
Where AI Can Help
AI won’t replace your judgment. But it can:
Automatically categorize and structure invoice data
Spot trends, anomalies, or rate changes
Suggest baselines for similar matters or vendors
Instead of searching through spreadsheets, you can ask: "What did we spend on employment disputes last year? By which firms? At what hourly rates?"
That’s the difference between guesswork and strategic forecasting.
Then try the 80/15/5 Forecasting Rule
Once you have the right structured data in hand, here’s a simple framework we’ve seen work well:
80%: Based on well understood historical data for recurring or expected matters
15%: Buffer for known unknowns (e.g. regulatory inquiries, employee disputes)
5%: Strategic reserve for innovation, unplanned AI investment, or experimental matters
This structure helps you balance realism with flexibility, and gives finance a model they can actually understand.
Budgeting as a Strategic Moment
Done right, budgeting season is a chance to:
Align legal priorities with business goals
Make the case for smarter spend, not just less spend
Build confidence with finance and leadership
You don’t need perfect data to start. You just need a system that gives you visibility—and the willingness to treat your budget like the strategic tool it is.
