Your Legal Department Budget: A Strategic Annualized Approach

In preparing a legal department budget, legal ops professionals should collaborate with their general counsel and legal team to ensure the budget aligns with departmental and organizational goals. 

In a Thomson Reuters blog post, Sterling Miller writes that team members managing specific areas can provide insight into expected needs, while transparency can foster team ownership of the budgeting process. Including the general counsel and legal team will also make mid-year adjustments easier, as the rationale behind decisions has already been shared. 

In preparing the legal department budget, legal ops professionals must first identify all the cost components. This includes salaries, benefits, department-specific technology, continuing legal education, travel, and bar memberships, with outside counsel fees often the largest line item. While some legal costs can be reallocated to a special cost center or other departments, omitting minor items like office supplies or postage can result in unexpected gaps. 

A critical step is accounting for prior year accruals. Unbilled invoices from law firms can blindside a new budget if not appropriately tracked and charged against the previous year. Reviewing past spending data is also crucial. It allows legal ops professionals to calculate averages and use current open matters as predictors for future expenditures. 

Essential operational fees—like licensing, trademark maintenance, and registered agent services—must also be factored in, as they are non-negotiable costs of running the legal function. Additionally, managing increases in external counsel fees and considering shifting work to more cost-effective firms or back in-house can dramatically improve budget efficiency. 

Understanding company-wide plans, such as expansion, mergers, and acquisitions, helps align legal budgeting with the broader business strategy. Legal ops professionals should consider annual budgeting as an opportunity to reassess priorities, advocate for resources, and ensure every dollar is justified.