For the past few years, BigHand has been reporting on rising client expectations. In 2020, 66% of NA and 65% of UK firms confirmed increasing pressure on fees from clients; last year, the pressure extended towards greater demands for financial transparency. This year is no different: half (50% of NA and 42% of UK firms) report a demand for even more client reporting, underlining the shift in attitude amongst clients toward micro-managing their law firm relationships.
Given the financial pressures affecting all businesses in every sector, it should be no surprise that over half (54%) of NA and 45% of UK firms have experienced an increase in demand for real-time financial updates for matters. With underlying costs rising fast across the board, clients are more proactive in tracking all expenditure. They no longer want to wait for a bill but require a constant update on their financial liability information.
In addition to real-time information, clients want more financial transparency (53% of NA, 51% of UK). Clients do not want to spend money on overpriced legal resources undertaking tasks that could be efficiently achieved by less qualified individuals. Law firms are under ever greater pressure to provide more detailed information about the resources used across each matter.
In 2021's research confirmed that 41% of NA and 51% of UK firms were providing greater visibility of the pricing breakdown at the start of a matter; with 35% of NA and 40% of UK firms also introducing upfront billing or billing on milestones. But clients want more: today 50% of NA and 43% of UK firms say clients now want clearly defined matter budgets, indicating the importance of not only defining and agreeing the matter remit up front but also effectively managing the process throughout a matter.
Firms have been varied in their response to this escalating client demands 87% of NA and 89% of UK firms say that more mandated matter budgeting has been introduced in the past 12 months. However, the decision to include a matter budget, unless client mandated, is often still left to the discretion of the individual lawyer. Our survey revealed that 41% of NA and 47% of UK firms are creating matter budgets based on client requests. This leaves around half of the matters unbudgeted unless requested for other reasons. This is a gap that could be proactively closed – resulting in strong client engagement to the benefit of both the client and the firms.
Matter budgeting still has not become standard best practice. Firms have more work to do in standardizing their approach to matter budgeting. 63% of NA and 49% of UK firms will make the decision to use matter budgeting based on matter value, while 49% of NA and 46% of UK confirm matter budgets are only used in certain practice areas. This inconsistent approach can leave gaps in client experience, which over time can hurt the firm’s ability to build strong, long term client relationships.
Clients are looking to firms to provide more transparency and information regarding their matters. Our results demonstrate that only 1.5% of NA and 3.2% of UK firms provide regular updates on every matter. The provision of more consistent and better matter updates will both improve client satisfaction and provide competitive differentiation.
The disconnect between the want and need for matter budgets exists for both clients and firms. Our survey(s) show that very few firms provide matter budgets unless compelled by the client or internal policy governing the potential value of the matter.
The truth is, matter budgets work. They have a proven impact on profitability: 99% of NA and 100% of UK firms confirm an increased billing realization when a budget is assigned to a matter. In fact, the impact is very significant, with 61% of NA and 72% of UK firms reporting an increase in billing realization more than 10% as a result of assigning a budget. Often this impact is significant, with 65% of NA and 72% of UK firms reporting an increase in realization of over 10% for matter with budgets.
Providing matter budgets should not be viewed as requirement for meeting specific client demands. Matter budgets should be used as they provide increased realization rates, and higher profitability. Beyond the commercial impact, matter budgets provide an opportunity to reinforce client relationships and build trust. Firms are constantly looking to create value for their clients – a fantastic and simple way to provide value is to create matter budgets and have meaningful regular updates with your clients.
This was an excerpt from the report Improving Client Engagement to Safeguard Profitability. Access the full report to dive deeper into the findings from over 800 legal finance professionals:
A view into the importance of empowering lawyers with real-time, matter level information to maintain profitability in the face of rising costs and reducing demand: Findings from over 800 senior finance professionals in the UK and North America.