Legal Spend Accruals: A Monthly Close Process for Legal Ops

Legal spend accruals are estimates of outside counsel costs your department has incurred but that have not yet reached accounts payable at the end of an accounting period. Finance books them so each month’s expenses reflect the legal work actually done, whether or not the invoice has arrived. For legal operations, the accrual is a monthly deadline with a number attached, and that number is only as good as the process behind it. This article covers the close itself: collecting estimates, validating them, locking the balance, and checking it against the invoices that follow.

What are legal spend accruals?

Legal spend accruals are the total of known outside counsel costs that finance has not yet recorded, made up of work law firms have done but not billed plus invoices legal has received but not yet passed to accounts payable. Both halves matter. An accrual built only from firm estimates understates spend, because invoices sitting in review are just as much an unrecorded cost.

In Legal Tracker, for example, the accrual sent to finance equals law firm unbilled amounts plus pending invoices not yet sent to AP. Other eBilling platforms follow the same logic even where the labels differ.

How the platform stores and calculates accruals is a configuration question, covered in detail in eBilling accrual configuration, which sets up the fields and rules the monthly close depends on. The rest of this article assumes that setup is in place and focuses on running the close each month.

What goes into a legal spend accrual?

A legal spend accrual is built from four components, and the monthly total is only reliable when each one is captured separately.

• Unbilled fees. Work the firm has performed through the cutoff date and not yet invoiced, reported by matter.
• Unbilled expenses. Disbursements incurred but not yet billed, such as expert fees, filing costs, or travel.
• Pending invoices. Invoices received in the eBilling platform that are still in review or approved but not yet exported to accounts payable.
• Credits and reversals. Approved credit notes or corrections that reduce what the department owes.

Watch how rejected invoices are handled. In some platforms a rejected invoice drops out of the spend figures entirely, so firms should include any unresubmitted rejected invoice in their unbilled estimate. Disputed invoices, by contrast, usually stay in the accrual. Agree both rules with finance and write them into your firm instructions.

What does the monthly legal accrual close look like?

The monthly legal accrual close is a fixed sequence of six steps, run to a calendar agreed with finance. Most departments complete it in three to five business days around month end. That window is tight, because finance is racing its own deadline: a 2025 survey of 100 finance professionals found half of finance teams take six or more business days to close the month.

• Set the calendar. Agree the cutoff date, the firm submission deadline, and the date finance needs the final number.
• Build the request list. Generate a list of open matters by firm, with prior accruals, budget, and invoiced-to-date spend for context.
• Request estimates. Ask each firm for unbilled fees and expenses by matter through the cutoff date.
• Validate submissions. Check for missing matters, unexplained zeros, and large swings before anything is locked.
• Add pending invoices. Include every invoice in the platform that has not yet gone to accounts payable.
• Review, lock, and export. Have matter owners confirm material items, lock the period, and send the report to finance.

Not every firm needs to submit every month. Many departments require submissions only from firms above a materiality threshold, such as $25,000 of monthly spend, and cover the rest with estimates or quarterly submissions.

When should law firms submit accrual estimates?

Law firms should submit accrual estimates on a schedule that gives finance the number on time while letting firms pull figures from their own billing systems. The key choice is whether firms submit before or after the period ends.

Submission after period end is easier for firms. They report one figure, the actual unbilled amount through the cutoff, straight from their time and billing system. Submission before period end fits tighter finance calendars, but firms then report two figures: unbilled work through the last full month plus an estimate for the current month. The estimate is the part most likely to be wrong.

Frequency is the second choice. Monthly submission gives the most accurate accruals and the most work for firms. Some platforms can derive unbilled amounts from matter budgets in the months between firm submissions, so firms submit only quarterly or once a year. That option works well for smaller firms with steady, predictable work.

How do you validate law firm accrual submissions?

Law firm accrual submissions are validated by running a short set of checks on every figure before the period is locked. The checks catch most errors in minutes, which is far cheaper than explaining them to finance after close.

• Missing matters. Every active matter expected to have work in the period has a submission.
• Unexplained zeros. A zero on a matter with recent activity gets a question to the firm before it is accepted.
• Large changes. Any figure that moves more than 25 to 50 percent from the prior period is reviewed by the matter owner.
• Invalid entries. Negative values and duplicate submissions for the same matter are corrected.
• Budget breaches. An accrual that pushes a matter past its remaining budget is flagged for the matter owner.

Keep the review targeted. Matter owners should confirm only the flagged items and the largest accruals, typically the top 20 matters by value, and leave the rest to pass.

What happens when a law firm misses the accrual deadline?

When a law firm misses the accrual deadline, the department needs a written policy that fills the gap with a reasonable estimate and makes repeated misses costly for the firm. Leaving the matter at zero understates spend and undermines the accrual.

Common approaches include estimating the missing figure from the matter budget or the prior month’s run rate, entering a reviewed estimate on the firm’s behalf, and for repeat offenders, making timely accrual submission a condition in the billing guidelines with invoice consequences. Whatever the policy, apply it consistently and report missed submissions by firm each quarter.

Firms comply more readily when accrual deadlines are explained during eBilling onboarding, and a short reminder three to five days before each deadline lifts on-time rates noticeably.

How do you reconcile accruals against actual invoices?

Accruals are reconciled against actual invoices by comparing each period’s accrual for a matter and firm with the invoices later received for the same service period. The difference is your accrual accuracy, and tracking it is what makes next month’s number more credible.

Expect some variance. An invoice for December work that arrives in February may exceed the December accrual, leaving a negative remaining balance. Departments handle this by netting variances across matters in the same cost center, or by moving the excess into the next period with a documented adjustment. Agree the approach with finance before the first year-end, since fiscal-year rules usually limit each accrual to services rendered in that year.

Reconcile material firms and matters every period, and review the full picture quarterly. An automated ELM to finance integration makes accrual reconciliation far less manual, because invoices, payments, and accruals sit in connected systems.

Which KPIs measure legal spend accrual accuracy?

Legal spend accrual accuracy is measured by a small set of KPIs covering firm compliance, coverage, and how close the estimates land to the invoices that follow. These are internal control targets, set from your own baseline over several periods.

• On-time submission rate. Firms submitting by the deadline divided by firms required to submit. A common target is 95 percent or higher.
• Matter coverage. Eligible active matters with a submitted estimate divided by all eligible active matters, targeting 95 to 100 percent.
• Accrual variance. The difference between the accrual and the invoices later received for the same period, by firm and matter.
• Material variance rate. Accruals outside your permitted variance divided by all accruals. Below 10 percent is a reasonable target once the process settles.

Report these alongside spend on the department dashboard. Legal department KPIs carry more weight with finance when they include accrual accuracy, since it is the measure finance feels directly at every close.

Conclusion

Legal spend accruals hold up when the close runs the same way every month: a calendar agreed with finance, estimates collected from the firms that matter, pending invoices added, targeted validation, and a locked balance exported on time. Reconciling each period against the invoices that follow is what turns the accrual from a guess into a figure finance trusts. Start with the process, measure submission and accuracy, and tighten the thresholds as the numbers improve.

Frequently asked questions

What are legal spend accruals?

Legal spend accruals are estimates of outside counsel costs incurred but not yet recorded by accounts payable at period end. They combine law firm unbilled fees and expenses with invoices received by legal but not yet sent for payment.

Why include pending invoices in a legal accrual?

Pending invoices belong in a legal accrual because they are known costs that finance has not yet recorded. An accrual built only from firm estimates understates spend by the value of invoices still in review.

How often should law firms submit accrual estimates?

Law firms with material spend should usually submit accrual estimates monthly. Smaller firms can submit quarterly or annually, with unbilled amounts derived from matter budgets in the months between submissions.

What should happen if a law firm does not submit its accrual?

When a law firm does not submit its accrual, the department should estimate the figure from the matter budget or recent run rate. Repeat misses can be addressed through billing guideline requirements with invoice consequences.

How is legal accrual accuracy measured?

Legal accrual accuracy is measured by comparing each period’s accrual with the invoices later received for the same service period. Track the variance by firm and matter, and the share of accruals outside your permitted threshold.

Should rejected invoices be included in legal accruals?

Rejected invoices should be included in legal accruals through the firm’s unbilled estimate if they have not been resubmitted by period end. Some platforms remove rejected invoices from spend figures, so the firm must report them.

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*This article is provided for general information only and does not constitute legal advice. Basla Solutions provides legal technology implementation and support services and does not practice law.*