A strong quarter can make next year's spending decisions feel straightforward. Renew the subscriptions, add capacity, and keep growing. But each new commitment changes the amount of work the firm must support before there is room for unexpected costs or a quieter period.
Recent law firm research makes that tension worth discussing. The useful response for an owner is a review of the commitments behind the budget, with a clear reason for keeping each one.
The industry signal: growth is carrying a higher cost base
In an August 31 analysis of the second quarter of 2026, Thomson Reuters Institute reported increases of 8.3% in direct expenses and 7.7% in overhead. Technology and knowledge management spending combined rose 11.6% overall and 8.7% per lawyer. Read the expense analysis.
The accompanying Q2 Law Firm Financial Index report describes improving financial performance alongside differences between large and midsize firm segments. It draws on Thomson Reuters Financial Insights data. Those market results provide context; they are not a cost forecast or a spending target for an individual small firm. See the report and methodology.
For your own budget, ask a narrower question: which costs are commitments you must carry, and which are choices you can still adjust? The exercise below is an editorial framework for answering that question with your firm's records.
Build a renewal calendar before a wish list
Start with recurring contracts and planned additions: software, research services, premises, outsourced support, and other continuing arrangements. Record the owner, current charge, renewal date, notice deadline, and the amount expected next year. Where a price is unconfirmed, mark it as an estimate.
The notice deadline matters because it identifies when a decision is actually available. A service that renews in January may require a decision months earlier. Review the agreement rather than assuming a calendar reminder on the renewal day leaves time to change course.
Separate unavoidable near-term commitments from flexible spending and proposed additions. This gives partners a realistic view of the decisions in front of them. It also prevents a budget discussion from spending an hour on a large cost that cannot currently be changed while overlooking several smaller renewals.
Give each recurring service an operational purpose
For each service, write one sentence explaining the work it supports and name the person responsible for checking that it still does so. A useful description is specific enough to inspect: preparing a recurring report, supporting a research workflow, or covering calls during defined hours.
Then gather evidence appropriate to that purpose. Seat usage may help identify unused licenses, but it cannot fully measure the value of a specialist resource needed only occasionally. Ask the users what would happen if access changed, which tasks would move elsewhere, and what the replacement would cost.
Look for overlapping purchases, but check the workflow before consolidating. Two tools with similar descriptions may serve different requirements. Conversely, a feature already included in an existing subscription may make a separate purchase unnecessary. Make the comparison using actual needs, contractual terms, and the work required to switch.
Test commitments against more than one revenue assumption
Build a base case and a quieter-work case using your own accounting records and a consistent accounting basis. These are planning scenarios, not predictions. Keep the assumptions visible so partners can change them rather than argue over an unexplained total.
Hypothetical example: a simplified annual plan has $1,000,000 of revenue and $800,000 of operating expenses, leaving $200,000 before any items excluded from the illustration. Adding $30,000 of recurring expenses reduces that remainder to $170,000 if revenue is unchanged. If revenue instead falls to $950,000 and those expenses remain $830,000, the remainder becomes $120,000.
The example does not represent a firm's results or an industry benchmark. Its purpose is to show how a recurring addition and a modest revenue change interact. In your version, identify which expenses would really vary with work volume and which would stay fixed. Keep taxes, financing, owner compensation, and other items explicit rather than assuming every firm treats them alike.
Bring operational evidence alongside the accounts
Accounting records establish the expense picture. Operational reporting can help explain what work the firm is doing and where a proposed purchase is supposed to help. Keep those roles clear when preparing the meeting.
For firms using Clio Manage, Keeney Analytics Reports can produce a Firm Briefing and focused reports from synced data, with PDF and CSV options. Reports include scope, source timestamps, and measurement notes. Use them to support a discussion about recorded activity and billing while reviewing costs separately in the firm's accounts.
Preserve the report used for the decision. A saved report configuration stores choices rather than a historical snapshot, and relative periods update when reopened. Receivables and work in progress reflect the current sync, so they should not be treated as reconstructed balances for an earlier budget meeting.
End with a decision and a date
Assign each reviewed item an outcome: renew as proposed, change the arrangement, investigate further, or decline renewal after checking the consequences. Give unresolved items an owner and a decision date before the relevant notice deadline.
For a new purchase, agree in advance what evidence would justify continuation. That might be adoption by the intended team, a reliable workflow, or a measured reduction in a particular administrative task. Avoid assigning a revenue gain to a purchase without evidence linking the two.
The result should be a budget partners can explain: the commitments they are making, the assumptions supporting them, and the dates when those assumptions will be revisited.