Industry report: Less than 2% of firms provide budget updates throughout a project

BigHand’s latest industry report into law firm pricing and matter budgeting, published today (7 October), has revealed the full extent of rising client pressure for pricing visibility and alternative fee arrangements (AFAs), and law firms’ lack of data and processes to meet it – with tracking of actuals against budget taking place for less than 38% of matters.

Over August 2021, BigHand gathered 800 responses to its industry survey from senior legal finance roles, managing partners, LPM, and finance systems roles from firms of 100+ lawyers in the UK and North America.

According to the findings, 82% of firms have experienced rising client demands for financial transparency. Clients also want more AFAs, with respondents reporting an average increase of 27% in client demand since the pandemic began.

At the same time, payment problems have become widespread – not only have 94% of firms experienced a delay in settling bills, but write-offs have also escalated, which has accelerated the need for firms to gain more control over costs.

The reports says that 98% of firms took ‘radical steps’ to control costs at the beginning of the pandemic, enabling them to retain profitability during a time of crisis, but raising questions as to the sustainability of that profitability in the face of rising costs.

To meet client expectations, 46% of firms have provided greater visibility of the pricing breakdown at the start of the matter over the past 18 months, and 42% have introduced alternative fee arrangements – with the report providing a detailed breakdown of type and volume. However, less than 2% provide budget updates throughout the project lifecycle on 100% matters, showing that firms are still constrained by a lack of data.

Group marketing director Briana McCrory said: “We conducted the research in response to the increasing demands for data and insight as to what others are doing in the industry. The report highlights how the shift in client relationships to meet demand is being achieved through change. By creating a new culture where every lawyer understands the importance and value of price. By building new, effective processes for matter budgets that deliver consistent control across the firm. And by investing in dedicated pricing technology that supports this change – and provides a foundation for continued innovation. It’s an exciting time for law firms as they embrace this change and drive their businesses forward.”

To find out more or access the full report, click here.