KPIs and Improving Profitability with Business Intelligence SCOTT RANDALL ADVANCED LEGAL WWW.ADVANCEDLEGAL.COM
The Business of Law Has Changed
Law Firm Growth is Flat
Realized Rates are Declining
Competition Between Law Firms Has Increased The Supply of Lawyers Exceeds Demand and the Gap is Widening Alternative Fee Arrangements Continue to Increase Rising and Loyalty to a Single Firm is Falling The Road to Partner is No Longer Certain for the Associate Rank and File
Financial Metrics for Benchmarking Revenue per Employee :: $150,000 Revenue per Attorney :: $500,000 Salaries :: 65% of Cash Receipts Marketing :: 8% of Cash Receipts Rent :: 6% of Cash Receipts Source: How to Evaluate Law Firm Financials, Inc. 1/22/2014
Success In The Business of Law Requires Extreme Efficiency and Real-Time Management
What Is Business Intelligence? Measurable Insights Into Business Performance What Is Measurable? What Is An Insight?
BI Realities Business Intelligence provides information to act upon. Business Intelligence does not ensure actions are taken. Actionable Information will only make a difference when acted upon. Business Intelligence is a Starting Point for Extreme Efficiency and Real-Time Management.
Key Performance Indicators (KPIs) Identify and Act Upon Key Indicators of Firm Performance Identify and Ignore the Numerous Non-Essential Information Indicators Fully Integrate KPIs through All Levels of the Law Firm Structure (i.e., do not lock away information at the top management levels)
The Seven Essential KPIs And Three Focal Points For Law Firm Success
Daily Focus Law Firm Billing
KPI 1 Work In Progress Current Information Updated Daily Firm-Wide Office Location Areas of Law Assigned Professional (Originating, Responsible) Working Professional Client, Matter, Value, Age, Billing Speed
KPI 2 Billing vs. Projection Current Information Updated Daily Firm-Wide Office Location Areas of Law Assigned Professional (Originating, Responsible) Working Professional Client, Matter, Working Professional, Actual Billings, Projected Billings
Weekly Focus Law Firm Collections
KPI 3 Accounts Receivable Current Information Updated Daily Firm-Wide Office Location Areas of Law Assigned Professional (Originating, Responsible) Working Professional Client, Matter, Value, Age, Collection Speed
KPI 4 Cash Receipts Current Information Updated Daily Firm-Wide Office Location Areas of Law Assigned Professional (Originating, Responsible) Working Professional Client, Matter, Working Professional, Actual Collections, Projected Collections
KPI 5 Client Advances Current Information Updated Daily Firm-Wide Office Location Areas of Law Assigned Professional (Originating, Responsible) Working Professional Client, Matter, Balance, Age, Collection Speed, Billing Status
Monthly Focus Line of Business
KPI 6 New Business New Matters by Time Period Client (New / Existing) Area of Law Assigned Professionals Office Location Projected Staffing
KPI 7 Client Distribution Current Information Updated Daily Client Matter Area of Law Cash Receipts Contribution Percentage Used to Determine Core Practice Areas
Reporting Analytics
Effective Rate Trends
Inventory Lifecycle
Profitability by Professional Direct Expenses Indirect Expenses Professional Weight Billing Actuals Cash Receipt Actuals
Profitability by Matter Baseline Profitability by Professional Professional Contribution to Matter Billings to Matter Cash Receipts to Matter Extrapolate Matters to Area of Law, Assigned Professional, Office Location
Matter Lifecycle Metrics Days from Start Date to Completion Date Professional Type Hours Needed During Timeframe Optimization of Hourly Requirements to Appropriate Professional Type Cash Receipts by Timeframe
Visual Dashboards Engage Firm Wide ProLaw 2014.1 Native Visual Report
Visual Dashboards Engage Firm Wide
Visual Dashboards Engage Firm Wide ProLaw 2014.1 Native Visual Report
Inquiries Into Business Process Management
What area(s) of law should our firm be focused on growing?
How should we price Fixed Fee / AFA matters?
matter, what resources will be required, how quickly and will the matter be profitable to the firm?
Which professionals are most effective in the following roles: Origination, Leverage, Efficiency?
by working professional by inventory speed?
What are the value and time requirements of docketing events yet to be completed?
How do we mentor associates on business management and guide them to a successful future?
Can we utilize metrics to assist with professional retention (increased write-offs and decreased utilization leading up to termination date)?
Roadmap to Improving Profitability The Seven KPIs Law Firm Billing Daily Work In Progress Billing vs. Projection Law Firm Collections Weekly Accounts Receivable Cash Receipts Client Advances Line of Business Monthly New Business Client Distribution Reporting Analytics Business Process Management