Everything You Need To Know About
Legal Tech Budgets
With “92% of jobs now requiring “digital skills,” it is difficult to find an industry that isn’t, in some way, reliant on technology. The legal industry is no different. In fact, in a recent study, “60% of law firm owners believe that their clients expect them to use technology to deliver legal services.”
From case management software to AI-powered assistants, there are many different ways technology can be embedded into a law firm’s day-to-day practices. Despite this, many law firms are failing to take advantage of this.
What are the benefits of using technology within law firms?
Law firms of all sizes can benefit from embedding technology into their day-to-day practices. For example, technology can:
- Improve efficiency and productivity rates
- Ensure law firms remain competitive
- Improve cash flow
- Help law firms stand out in a crowded market
- Improve data security measures and protect a firm’s reputation
- Improve day to day operations
Why are some law firms failing to invest in legal tech?
While many law firms consider tech a priority, studies suggest that few are actually taking the leap and investing in new technologies. In a recent interview for the ABA Journal, FinOp Group Founder Greg Critchfield argued that this disparity is caused by a variety of factors, from budgetary concerns to poor prioritization and, perhaps most keenly, resistance to change.
For example, he stated that “the short-term pain of a change sometimes outweighs the long-term gains in law firm management’s eyes. Sometimes firms just don’t realise what all is out there, and how there is technology and consultants to guide them through the transition.”
Finances could also play a key role in a firm’s ability to invest in new technology, which, while promising a positive ROI, can quickly get expensive. However, proper budgeting can help make tech adoption a little easier.
How much should law firms spend on technology?
Unfortunately, there’s no direct answer to this question. The amount that a law firm should expect to spend on technological innovation can vary based on a variety of factors, from the size of their firm to the kind of tech they plan to use. Firms that have, until now, avoided the wave of technological innovation will likely need to spend more to bridge the gap between their practice and those that have been investing in new technology as soon as it is realised.
However, law firm owners can determine their budget for legal tech by:
- Conducting an assessment of the firm’s needs and objectives. When pulling together this report, think about the ways in which those needs and objectives can be met through technology. For example, those looking to improve response times to client inquiries could invest in automation technology.
- Carrying out market research. Looking into the technology that others within your industry or practice area can also prove useful. This helps you to determine the kind of technology that you should be utilizing in order to reach your goals.
- Think about the long-term costs. When it comes to using technology, it’s not only the upfront cost you have to take into consideration. You should also factor any ongoing expenses into your budget, such as maintenance, support, training and integration.
The above steps should make it easier to determine how much you should (and can afford) to spend on tech. However, you should monitor the tech budget regularly in order to ensure you are maximizing your ROI! This way, you can make adjustments when necessary.
Generally speaking, around 5-7% of a law firm’s budget is allocated to tech. In the interview referenced above, Greg stated that “this budget typically covers not only the upfront costs but subscriptions, upgrades, training and support.”
If law firms are looking for a way to increase tech budgets, it’s crucial that they first figure out areas in which they cut back on spending. For example, lowering their marketing budget could mean that they’re able to invest in better technology, which will ultimately be much more positive for the firm overall.
Working with an experienced legal accountant can also help when it comes to ensuring that a law firm’s finances are handled correctly. For example, at FinOp Group, we help law firms make the most out of their budgets through our financial services. Get in touch today to find out more!
