Legal departments hire and manage outside vendors, primarily law firms, more than any other department or business unit at a company. Tracking vendor spending and legal matters are therefore of the utmost importance to efficiently and effectively manage even a small legal department. A/P software is generally capable of tracking spending by cost center and vendor, but is unable to track spending in the detailed way that is necessary for a legal department. With that said, it is startling how many legal departments rely on their A/P software, often in conjunction with an Excel spreadsheet or Access database, attempting to track spending in their legal department. Even when legal departments investigate software as a service ("SaaS") e-billing and matter management software, they are sometimes met with resistance from their A/P, IT Ops, and procurement departments that believe the legal spend is already being adequately tracked with their current A/P software. These arguments can be met with two clear responses: First, A/P software does not accurately capture and report data that is important to the legal department. Second, e-billing and matter management software provides vital functionality and capabilities to the legal department that A/P software simply cannot.
There are a bevy of reasons that, for the legal department's purposes, reports on spend from A/P software are insufficient and inaccurate. This is not due to poor execution in the A/P department or faulty A/P software, but due to the fact that dissecting legal spend is a precise process and A/P software simply isn't up to the task. Invoices for payment of claims or settlements, for example, may be coded into A/P software as legal spend, skewing the legal spend numbers. Additionally, A/P software often lumps law firms in with professional services or consultants as well. For example, an IT consultant hired to clean up your document management software may be considered a legal vendor along with law firms, making the overall spend report on legal spending misleading and inaccurate.
Another issue that is common is that international companies or companies that have had recent mergers may have multiple A/P systems, further compounding a law department's ability to get an accurate report of basic overall legal spending. Nielsen has acquired many companies over the years with the policy of keeping the target company's A/P system for two years before rolling it into the main system. "It became a real problem because we couldn't tell who's managing these matters – there was no way to look at the overall workload and know how much we were spending on a particular matter or even by a particular entity with the company," says Bob Engel, manager of Nielsen's legal department. In addition, at one point each of Nielsen's geographic regions throughout the world had their own accounting system that would take six to nine months to get rolled into their overall spend, oftentimes with law firms submitting invoices both to the office where the work was being done and the corporate headquarters. Because of all of these various complications with their A/P software, Nielsen simply wasn't able to report across the global enterprise until they put everything on their SaaS solution.