Last month we reviewed the importance of containing costs but maintaining quality when working with outside law firms. Budgeting is one of the best ways to achieve this. Budgeting is an excellent way to educate and manage client expectations about a case. In our January 29th post, we explored how requiring a budget in your billing guidelines and participating in frequent budget discussions with the firm can greatly improve your budget process. Part II of this article focuses on additional ways to improve firm budgets.
Other ways to improve your budget process include:
Use UTBMS codes in budgets and invoices
In order to effectively track budgets to spending, it is extremely helpful to base both the budget and associated invoices on UTBMS codes (Uniform Task-Based Management System). Using UTBMS codes allows attorneys to budget by litigation task while providing meaningful cost information to clients.
If the invoice and budget contain UTBMS codes, the client can follow the accuracy of the budget as the firm begins to bill on the matter. The budget is monitored and tracked against the UTBMS codes assigned to the invoice entries. With this type of information, the client can evaluate how much was spent on items such as experts/consultants, or in depositions for the year. The client can also review the accuracy of budgets for the year and has a roadmap that aids in forecasting budgets for the following years.
Use a phased approach to budgeting
Using a phased approach to budgeting is another growing trend. Instead of supplying an entire budget from case assessment and development all the way through trial, some clients are requesting a budget for the current phase of litigation. Once a certain phase of litigation begins to draw to a close, the firm submits a budget for the next phase. The idea is to keep the estimates more realistic by budgeting one phase at a time. Many cases settle before trial and budgeting through trial gives a false sense of the total cost for a case. These clients understand the inherent uncertainty in trying to budget for litigation and would rather use the budget as a tool to keep client and firm objectives and expectations in alignment.
Don’t forget to budget for expert and consultant fees
Remember to request that firms add expert and consultant fees in their budgets. Often, firms surprise clients with additional fees from outside vendors that are not accounted for in the budget. Try to negotiate lower rates with some of these outside vendors (such as court reporters and discovery vendors) and ask the firms to use these selected vendors in order to save costs.
The beginning of a new year is a perfect time to review your policies and renew your dedication towards the practice of budgeting. Time constraints as well as uncertainty surrounding events in litigation can make budgeting a difficult task for both the client and the law firms. With a little time and commitment, clients and firms will see how the budget can be used to further an understanding of how a litigation may play out. In turn, both parties will be able to make better decisions regarding the next phases of litigation. An agreement between the client and firm that budgets are a means to communicate litigation issues and keep the business objectives of both parties in alignment can bring improved performance in the new year.