In the first lesson on budgeting, we asked why some bills are easier to collect than others. This time we take a closer look at the relationship between law firm budgets and client budgets.

Let's start by noting the increase in increased demand for legal services. It was sudden and very welcome, but quite possibly temporary. This uptick had some remarkable knock-on effects, starting with competition among law firms for talent, leading to increased salaries. Since law firms have no appetite for reducing profitability, this will all get passed on to the place it started — clients. In all this animation, it is easy to forget the fundamentals. Demand may be up, but clients still care about money, and GCs are still budget holders.

So how does this all hang together? A common misconception is that there are competing processes here. It may seem like there's a budgeting process within law firms, then a separate process for individual attorneys, usually called targets not budgets, and lastly there's the clients' legal budgets. But, actually, this misunderstands the dynamic. In reality, there aren't three separate competing processes, but one joined-up process. As has been preached throughout Lean Adviser, lean law practice starts by looking from the client's perspective and the way forward instantly becomes clear.

Your firm may ask you and your colleagues to meet billable hours targets and revenue targets. This is common, and you may be forgiven for thinking that it's up to the clients to make this happen. But it's the other way around. Clients don't exist to help law firms make budget; law firms exist to help clients make budget.

From the client standpoint, every year there is a volume of work which needs to be supported, and the business sets aside some funding for the GC to achieve it. Project by project, and year by year, the GC has to manage a limited budget. If the GC runs out of budget, he or she has a problem. If you're the reason this happened, then you also have a problem.

We can see this intersect between the budgets of law firms and clients in sharp focus on the day you present a bill. If your work meets agreed expectations, comes in at an agreed budget, and if it represents overall value, then it's very easy for the GC to sign it off. It's also easy for the GC to rehire you for the next project. It all comes down to being reliable. This is why there is content in Lean Adviser about the difference between razzamatazz, which is of no value to clients, and reliability, which is priceless.

As you reflect on the importance of clients' budgets, here are some tips to remember:

1. The GC is accountable to the business — so you're accountable to the GC.
2. If in any doubt about budgeting, costing or price sensitivity, ask.
3. If you work efficiently, effectively and transparently, you'll meet budget and billing will take care of itself
4. Aspire to reliability, not razzamatazz; just do what you say you're going to do.
5. Demand goes up, and demand goes down, but good methods will be your ally forever.