BigHand Annual Legal Pricing and Budgeting Trends Analysis Report

Matter pricing refers to how firms estimate, budget, and communicate the cost of legal work to clients. It includes setting fee structures, creating matter budgets, tracking realization, and delivering client-facing financial reporting. Done well, it protects profitability, improves client trust, and helps firms compete with alternative providers. Yet many firms still rely on spreadsheets and manual processes, creating inefficiency and risk. 

Clients are demanding detailed budgets and real-time reporting. In fact, 50% of firms say they are under more pressure than ever to deliver it. At the same time, nearly half of firms still rely on manual tools, limiting their ability to respond quickly or consistently. Without structured processes, firms risk client dissatisfaction, scope creep, and write-offs that erode margins. For firms that don’t have effective client reporting tools, the gap between expectation and reality is widening.

Matter profitability improves when firms: 

• Implement budgets on a higher percentage of matters 
• Use data to track scope changes in real time. This is essential for budget vs. actual tracking for legal matters.  
• Train lawyers in financial acumen for client conversations 
• Adopt legal cost forecasting tools to replace manual pricing tools

70% of firms that use matter budgets report a 9%+ increase in realization rates, proving that structured pricing directly impacts the bottom line. 

Firms use a mix of hourly billing, flat fees, capped fees, contingency, and Alternative Fee Arrangements (AFAs). Increasingly, legal pricing software is used to model scenarios and improve pricing accuracy.

The demand for AFAs is rising, but most firms are still hesitant, applying them to fewer than 40% of matters. The real barrier appears to be firms’ ability to track and manage financial outcomes at scale. Those who can implement these models gain a competitive edge in terms of profitability. This is where good legal project management software or a legal financial management tool comes into play.

AI is already transforming how legal work gets done, but only 34% of firms have formally updated their pricing models to reflect these efficiencies. Without adjustments, firms risk undervaluing their work, losing credibility in client negotiations, and leaving profit on the table. Incorporating AI into pricing models is critical for future-proofing profitability. This is where AI legal pricing software becomes essential. 

• Hourly billing 
• Fixed or flat fees 
• Capped fees 
• Contingency fees 
• Hybrid (blended or portfolio-based) 

Only a third of firms provide dedicated financial KPI training for associates, leaving many lawyers underprepared for client pricing conversations. Without financial fluency, lawyers may offer discounts without understanding profit impact, and struggle to explain budgets, defend rates or identify profitability risks. Equipping lawyers with commercial skills protects margins and builds confidence

It’s technology designed to help firms build budgets, track profitability, and automate client reporting, eliminating manual spreadsheets.

ROI comes from improved profitability, reduced write-offs, higher client retention, and profit-led business development decisions.