Will There Be Budget Challenges for Legal Operations in 2025?

Legal operations has the daunting task of creating and managing the legal department’s budget, a process made difficult by the unpredictable nature of legal costs. Accurately forecasting legal expenses can be tough due to unknown variables, which is why, as discussed in an Epiq Global article by Peter Eilhauer, there may be budget challenges for legal operations teams in the coming year.

Unforeseen events like litigation or new business deals can spike costs; changes in business strategy, such as an increase in patent filings, can increase expenses; and outside counsel can take up 50% or more of the legal budget.

Despite these challenges, legal operations can make more informed budget decisions utilizing billing data. By reviewing last year’s spending data, it can assess the number of matters, their current phases, and anticipated future costs. Additionally, certain matters, like employment or intellectual property, can be reasonably forecast based on company growth and past events.

While itemizing can be helpful, legal operations should avoid getting bogged down by small, insignificant costs and focus on the larger financial picture. It shouldn’t waste time hunting down the cost of every minor technology purchase. To optimize budgeting, legal operations should consider the advantages of in-house legal work versus outsourcing to external counsel. By moving non-litigation work in-house, companies can provide more legal support while reducing legal costs. 

Ultimately, clean billing data is essential for accurate budgeting. Legal operations should conduct regular data reviews and spending analyses to ensure it doesn’t underestimate future budget needs. Although budget challenges for legal operations may be on the horizon, legal teams can reshape their approach to budgeting by following these strategies to better manage legal spend.