Firms must bolster their finance and pricing teams to accommodate current legal pricing and matter budgeting trends
Clients want more financial transparency from law firms in the UK and US, a survey conducted by global legal workflow solutions provider BigHand has revealed.
In its Legal Pricing and Budgeting Report 2021, the company explained that the financial challenges birthed from the COVID-19 pandemic have caused clients to scrutinise expenses more closely. Of the 800 respondents to the survey, 84% of those based in the UK and 80% of those in North America said that client demand for financial transparency is on the rise.
“The legal sector has not been at the forefront of digital transformation until now. The impact of the pandemic on client expectations for pricing transparency and flexibility is rapidly accelerating change,” BigHand said in the report. “Digitisation is widely believed to have accelerated by over five years in the space of just a few months and for law firms, the speed with which clients are achieving digital transformation is having a significant knock-on impact on the way they embark upon legal relationships.”
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Most firms (94% of both NA and UK respondents) indicated that payment problems had increased, with write-offs up by a maximum of 60% for 48% of UK respondents and 60% of NA respondents.
“The issue is not simply that many clients have experienced financial difficulties – they are far less tolerant of project overruns or unexpectedly high bills,” BigHand said. “Certainly, firms have begun to respond – by providing greater visibility of the pricing breakdown at the start of the matter and introducing upfront billing or billing on milestones.”
This trend has driven up the importance of finance and pricing teams to a law firm. The Legal Pricing and Budgeting Report 2021 revealed that over the past 18 months, 75% of NA firms and 61% of UK firms have brought dedicated pricing experts into their teams in light of the increasing focus on pricing and profitability.
“Law firm finance and pricing teams need to become ever more critical if law firms are to rapidly evolve to support the changes created by the pandemic and, critically, provide customers with value – rather than relying on profit-eroding discounts,” BigHand said.
Most managing partners (92% in NA and 80% in the UK) have also indicated that their firms are investing in dedicated pricing solutions over the upcoming two-year period.
“The creation of dedicated pricing experts is an important step – but these individuals cannot achieve change in isolation. Every lawyer needs to be more focused on the profitability of each matter – something that will require education, incentives, and the tools to make fast, informed decisions,” BigHand said.
BigHand conducted its survey last August with the managing partners of UK and NA firms employing over 100 lawyers. The survey also obtained responses with those in senior legal finance, legal practice management and finance systems positions.