Law firm AI budgets have become the ordinary position rather than the adventurous one. Four in five firms in the annual survey by the accountants Crowe, run with the Institute of Legal Finance and Management and reported on 16 September, have committed specific funds to AI-based solutions. When I ran a practice, a line like that would have been an argument, because the money went to premises, people and professional indemnity, and software waited until somebody showed it earned its keep. Crowe spoke to 39 firms turning over between £1.7m and £69m, which is the part of the market most readers of this site work in.
Crowe reads the figure as a change in the question being asked. For many firms, it says, the point is no longer whether they should invest in AI but how best to implement it. What sits behind that shift is visible in the rest of the survey, and it has little to do with enthusiasm for the technology.
Growth has stopped being what separates firms
Revenue grew by 11 to 12 per cent across both City and regional practices, and half of all firms beat the financial expectations they had set themselves. That is a strong year by any reading. Attention moved anyway. Fifty-one per cent named profitability and margin improvement as a key strategic priority, and rising people costs remain the heaviest pressure on margins, with 88 per cent of firms weighing pay rises of no more than 5 per cent. Profit pools grew by 12 per cent in the City and 6 per cent in the regions, though profit per partner proved harder to move outside London, since firms kept adding partners and senior talent and spread the same profit more thinly.
Nicky Owen, head of professional practices at Crowe, drew the conclusion in a sentence worth pinning above a management meeting. The firms pulling ahead, she said, are the firms turning growth into profit, cash and sustainable partner returns while continuing to invest in their people, technology and long-term future.
The regional firms won on cash
Lock-up tells the clearest story in the survey. City firms saw theirs rise sharply from 135 days to 153. Regional firms pulled theirs down from 140 to 132, which Crowe puts to billing discipline, collections and working capital management rather than to anything ingenious. A firm that improves cash conversion without spoiling the client's experience holds a genuine advantage in this economy, and a practice of any size can go after it.
Set your AI budget against that finding rather than against the drafting demonstrations you have sat through. Time recorded as the work happens, bills that leave in days instead of weeks, chasing that runs to a system rather than to memory, and a chronology built in an afternoon rather than a fortnight all show up in your lock-up days. Drafting gains are real and they are far harder to see on a balance sheet.
What goes in the budget line
Name the number before you choose the product. Write down where your lock-up stands today, what your write-offs came to last year, and how many days pass between the work finishing and the bill leaving the building. Buy against those three figures and test them at the quarter. A firm that sets money aside for AI without naming the number it intends to move has bought a subscription and called it a strategy.
Then watch what the budget costs you elsewhere. With 88 per cent of firms holding pay rises at 5 per cent or under, your AI line is competing with your people, and your people will work that out. The honest framing inside the firm is that the software is meant to pay for part of the pay review, and somebody then has to show that it did.
The fullest open account of the findings, including Nicky Owen's remarks and the figures quoted here, is at Legal Futures.
If your firm has set money aside for AI and nobody has yet named the figure it is meant to move, start with a conversation.