Legal departments often view themselves as separate businesses with the responsibility of making sure that an organization remains in good standing with complex tax regulations and other legal compliance regulations. Additionally, legal departments in today’s world are also often tasked with contributing to cost-cutting efforts and strategic initiatives to aid business growth.
In 2020, 74% of legal operations executives said that cost control was a top priority, and that was before the coronavirus pandemic wreaked havoc on businesses, the labor force, and the global economy as a whole. The need has never been greater than it is in a post-pandemic world.
Whether you are a small business or a multi-jurisdictional franchise, creating a well-defined legal operations budget is a necessity. Doing so can ultimately help you achieve your short-term and long-term goals and improve both department and company efficiency as a whole.
What Is a Legal Operations Budget and Why Is It Important?
Before we cover how to decide where to put spend, let’s cover what exactly a legal operations budget is and why it is so important. Whether you have a small business or a multi-entity franchise spread out over several jurisdictions, a legal operations budget is crucial because it outlines key information regarding the company’s current state of finances and both short-term and long-term financial goals.
Think of it as a financial road map that helps you guide decisions for your company. Because of this reason, it should be one of the first things you tackle when performing reviews and audits as well as looking at financial projections for the upcoming year. As a savvy business owner, a sound financial plan within your legal department can ultimately help you:
- Make sound financial decisions. You can determine where your finances currently stand and what needs to be done to hit financial goals in the future.
- Identify where to cut or grow spending. You can identify areas where you may need to increase or decrease spending in order to ultimately increase your profitability.
- Identify funding needs and opportunities. If you are planning to apply for funding from investors or business loans, you will need a breakdown of your finances that outlines your business income and expenses.
- Keep employees engaged. Budgets work to maintain finance goals, but they also can also be utilized with the intention of providing personnel with the tools and resources that they need to perform quality work and utilize their unique skills versus spending time on monotonous, time-consuming tasks.
How to Use Budgets to Reshape Operations and Strategies
Many companies today still task their legal departments with cost-cutting solutions in order to increase profitability. By understanding where the current state of your finances are at within your legal department, you are better equipped to demonstrate its value to the overall organization and use the information you gather to find ways to cut costs while improving productivity and efficiency.
Budgets can then help you reshape internal operations and entire company strategies. You’re able to get more aggressive with costs and cuts because you know exactly what is preventing optimal performance and you have a financial roadmap in place that can guide you toward optimal performance and efficiency.
Information regarding personnel will most likely be your biggest line item. Understanding, for instance, how to optimize headcounts and work priorities and divide responsibilities among staff can aid in making decisions for reducing costs.
Why You Need to Budget for Technology
Now that you understand the importance of a legal operations budget and how you can utilize financial information, the question remains: how exactly do you obtain this necessary data to increase efficiency? The answer is in new technology that ultimately helps you increase overhead, track day-to-day processes, increase transparency, automate workflows, and remain compliant with tax, corporate, and governance regulations.
Companies today also face challenges of aligning multiple cultures and generations without their organization. Based on these factors among others, each worker will have a unique expectation of their workplace and the value of teamwork. While multi-generational workforces can lead to tensions, they can also bring valuable skills to the table.
In order to effectively lead a diverse and multi-generational workforce, companies must understand the various traits, values, and behaviors of each generation. This information can be utilized with new ways of working, especially as it pertains to communication and collaboration. These two components can help bridge the gap between an increasingly diverse workforce and foster a work environment that supports collective action, critical thinking, and problem solving.
Investing in cloud-based entity management will allow your organization to do just that. With this type of technology, your personnel can have the tools they need to do their jobs efficiently and collaborate as a team while you have the insight you need to maintain overhead, accurately track processes, and determine where costs could be cut.
The bottom line is that legal operations teams in today’s day and age must prioritize technology in budget plans. At Athennian, our team offers multi-purpose and cloud-based entity management software that grows with your business and offers a complete solution to reporting and analytics, workflow and organization, and legal compliance.