ALA Webinar August 21, 2013

BUSINESS INTELLIGENCE THROUGH FINANCIAL REPORTING ALA Webinar August 21, 2013 Barry Jackson, CLM, CPA President JC4LM LLC www.jc4lm.com

BUSINESS INTELLIGENCE THROUGH FINANCIAL REPORTING Dashboard Graphics Similar to the dashboard of your car letting you know if your gas tank is full, etc. Generally you can show a three-year comparison of Billable Hours Billable Hours per Timekeeper Value worked Fees Billed Fees Received Net Earnings Cash Balance Term Debt Outstanding AR and WIP.

BUSINESS INTELLIGENCE THROUGH FINANCIAL REPORTING If you have a 2000 hour per year requirement 166.67 per month 1500 hours per year is 125 hrs per month Difference is 42 hours per month or 504 per year 3 attorneys work 2000 hrs/yr or 6000 in total 4 attorney work 1500 hrs/yr or 6000 in total You are paying one too many attorney salaries. You save $145,000 or more. Usually it is the or more category

BUSINESS INTELLIGENCE THROUGH FINANCIAL REPORTING General Ledger Accounting A new firm should obtain a good outside accountant and have them help you set up accounting software for your firm. The general ledger alone is too much information on a monthly basis Good Accounting is important to your bank, malpractice insurance agent, etc. If you are not getting good information, the confidence level in your firm from their perspective goes down Firms need to decide who gets what information. Remember Associates need to feel like they are part of the firm. Non-Equity Partners often feel left out.

BUSINESS INTELLIGENCE THROUGH FINANCIAL REPORTING First loose rule is 80% of expenses come from compensation, insurance and rent. The remaining 20% is scattered with little things. It makes you feel better to cancel reception flowers but rarely addresses the issue. Variance Analysis. It is helpful to compare your budget to actual and as the year progresses, the budget should be converted to a projection (actual to date with updated forecast for the rest of the year)

BUSINESS INTELLIGENCE THROUGH FINANCIAL REPORTING Be careful to note Revenue variances, Time variances and Billing variances. Most important statistic is hours per attorney. You could almost run the firm with this number alone.

BUSINESS INTELLIGENCE THROUGH FINANCIAL REPORTING Benchmarking is where you compare your financial results to surveyed results Determining correct billing rates are worth the cost of surveys to find out what you can charge You could find you are billing as a partner at lower rates than paralegals in big firms.

Fees Billed $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 J F M A M J J A S O N D 09 Budget 48,419 48,419 48,417 48,417 67,816 47,304 45,799 43,900 44,571 2009 49,375 47,300 42,499 45,695 51,847 38,421 39,172 54,371 43,011 2008 46,528 43,178 52,466 47,426 44,975 49,356 38,174 43,673 40,341

Fees Billed 450,000 440,000 430,000 420,000 410,000 400,000 390,000 380,000 09 Budget 443,062 2009 411,690 2008 406,117

XYZ LLP Year January February March April May - Dec YTD Cumulative Fees billed 2009 49,375 47,300 42,499 45,695 184,869 2008 46,528 43,178 52,466 47,426 216,479 189,598 09 Budget 48,419 48,419 48,417 48,417 249,390 193,672

DASHBOARD FINANCIAL PRESENTATION How to add only relevant numbers in a row for comparison (e.g.) Jan - May =SUMIF($D$2:$O$2,">0",D46:O46) D2:02 is the first line with =sum(d2:o2) in the total line. All other lines have the formula above. If Jan May equals $500,000 and Jan Dec equals $1,000,000, this formula will total $500,000 for comparison to the current year.

ACCOUNTS RECEIVABLE Total 0-30 31-6- 61-90 91-120 Over 120 Month 2010 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 Jan 4,078,411 3,785,199 1,297,764 1,331,787 762,394 559,818 366,337 307,004 241,925 224,161 1,409,991 1,362,429 Feb 4,075,598 3,924,070 1,471,079 1,599,394 605,072 540,114 418,717 272,306 191,179 166,786 1,389,551 1,345,470 Mar 4,006,891 4,111,839 1,220,965 1,262,312 865,391 1,003,224 238,626 391,129 231,461 181,255 1,450,448 1,273,919 Apr 4,576,166 4,644,082 1,741,106 2,139,204 743,614 431,243 415,245 500,659 150,093 220,199 1,526,108 1,352,777 May 4,670,797 4,803,903 1,558,717 1,520,939 1,015,329 1,104,877 356,031 390,433 261,757 304,740 1,478,963 1,482,914 Jun 4,886,894 4,842,077 1,489,594 1,427,149 1,042,575 922,906 592,600 695,483 204,889 249,348 1,557,236 1,547,191 Jul 4,990,813 1,544,122 861,398 551,827 469,238 1,564,228 Aug 5,045,936 1,451,982 1,006,544 532,969 363,550 1,690,891 Sep 4,807,927 1,680,234 565,933 567,940 321,335 1,672,485 Oct 4,653,752 1,402,073 882,510 469,134 305,943 1,594,092 Nov 4,715,716 1,530,661 781,755 570,159 254,981 1,578,160 Dec 5,081,564 1,641,076 1,100,065 555,217 302,465 1,482,741 WIP - Unbilled Fees & Disbursements Total Total 0-30 31-6- 61-90 91-120 Over 120 Month 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 Jan 2,546,991 3,856,301 1,580,019 1,601,632 173,497 1,275,532 80,129 50,963 45,839 49,170 667,507 879,004 Feb 2,636,441 3,112,175 1,509,433 1,592,782 329,028 513,490 67,555 55,627 44,392 48,905 686,033 901,371 Mar 3,124,095 3,556,382 1,706,520 1,757,944 500,810 615,179 149,741 259,937 46,990 35,909 720,034 887,413 Apr 2,964,209 2,976,108 1,795,547 1,671,126 321,343 431,808 80,812 84,280 41,405 35,198 725,102 753,696 May 2,620,384 2,912,558 1,514,406 1,496,630 342,012 497,025 74,724 71,426 40,895 70,065 648,343 777,412 Jun 2,763,455 3,056,089 1,658,001 1,685,198 305,861 400,174 117,476 123,055 51,855 48,046 630,262 799,616 Jul 2,805,841 1,703,490 375,641 36,013 36,143 654,554 Aug 2,477,492 1,449,732 281,054 70,396 26,195 650,115 Sep 2,672,469 1,630,316 257,457 98,908 39,888 645,900 Oct 2,777,183 1,698,693 316,529 52,091 35,217 674,653 Nov 2,870,470 1,591,492 508,042 75,390 30,190 665,356 Dec 2,533,228 1,537,331 170,684 124,417 59,412 641,384 Total Investment Total Total Month 2010 2009 Jan 6,625,402 7,641,500 Feb 6,712,039 7,036,245 Mar 7,130,986 7,668,221 Apr 7,540,375 7,620,190 May 7,291,181 7,716,461 Jun 7,650,349 7,898,166 Jul 7,796,654 Aug 7,523,428 Sep 7,480,396 Oct 7,430,935 Nov 7,586,186 Dec 7,614,792

Billable Hours 6,000 4,000 2,000 - Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2010 3,600 1,400 3,900 4,100 3,400 3,800 2009 3,600 3,500 3,900 3,800 3,400 3,900 3,800 3,400 3,700 3,900 3,600 3,500 2008 4,400 3,800 4,500 3,500 4,000 4,000 4,000 3,500 3,900 4,400 3,700 3,600 YTD Billable Hours 25,000 24,000 23,000 22,000 21,000 20,000 19,000 18,000 2010 20,200 2009 22,100 2008 24,200

Value Worked $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Jan Feb M ar Apr M ay Jun Jul Aug Sept Oct Nov Dec 2010 1,590,000 1,490,000 1,675,000 1,800,000 1,500,000 1,650,000 2009 1,540,000 1,500,000 1,690,000 1,600,000 1,475,000 1,660,000 1,650,000 1,450,000 1,600,000 1,675,000 1,575,000 1,540,000 2008 1,850,000 1,600,000 1,890,000 1,775,000 1,650,000 1,640,000 1,650,000 1,400,000 1,600,000 1,800,000 1,500,000 1,500,000 YTD Value Worked 10,600,000 10,400,000 10,200,000 10,000,000 9,800,000 9,600,000 9,400,000 9,200,000 9,000,000 8,800,000 2010 9,705,000 2009 9,465,000 2008 10,405,000

Billable Hours Per Attorney 200 150 100 50 0 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2010 137 132 143 151 130 145 2009 138 128 141 144 128 148 145 128 141 147 140 134 2008 152 129 154 146 132 141 145 120 135 155 128 128 YTD Billable Hours per Attorney 860 855 850 845 840 835 830 825 820 815 810 2010 837 2009 827 2008 854

Billable Hours Per Partner 200 150 100 50 0 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2010 133 127 142 151 129 144 2009 134 118 144 141 128 141 144 117 135 145 131 137 2008 153 130 161 148 134 136 131 111 126 150 124 130 YTD Billable Hours per Partner 870 860 850 840 830 820 810 800 790 780 770 2010 828 2009 806 2008 862

Billable Hours Per Associate 200 150 100 50 0 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2010 140 136 144 150 131 140 2009 143 138 138 147 128 143 132 139 149 149 149 132 2008 151 129 147 145 131 131 132 119 143 159 132 125 YTD Billable Hours per Associate 844 842 840 838 836 834 832 830 828 2010 841 2009 837 2008 834

Billable Hours Per Timekeeper 160 140 120 100 80 60 40 20 0 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2010 136 54 143 149 125 136 2009 133 126 139 143 127 134 131 90 97 104 99 100 2008 148 127 150 118 131 121 119 78 95 113 91 90 Timekeeper Headcount 50 40 30 20 10 0 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2010 27 26 27 28 27 28 2009 27 28 28 27 27 29 29 38 38 38 37 35 2008 30 30 30 30 31 33 34 45 41 39 41 40

Fees Billed $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Jan Feb M ar Apr M ay Jun Jul Aug Sept Oct Nov Dec 2010 1,525,000 1,375,000 1,145,000 1,900,000 1,640,000 1,400,000 2009 1,690,000 1,150,000 1,280,000 1,800,000 1,675,000 1,480,000 1,690,000 1,600,000 1,400,000 1,500,000 1,500,000 1,775,000 2008 1,675,000 1,145,000 1,690,000 2,200,000 1,260,000 1,700,000 1,700,000 1,600,000 1,400,000 2,050,000 1,300,000 1,600,000 YTD Fees Billed 9,800,000 9,600,000 9,400,000 9,200,000 9,000,000 8,800,000 8,600,000 2010 8,985,000 2009 9,075,000 2008 9,670,000

Fees Received $3,000,000 $2,000,000 $1,000,000 $0 Jan Feb M ar Apr M ay Jun Jul Aug Sept Oct Nov Dec 2010 2,200,000 1,300,000 1,300,000 1,300,000 1,500,000 1,225,000 2009 2,600,000 950,000 950,000 1,300,000 1,200,000 1,400,000 1,500,000 1,450,000 1,575,000 1,600,000 1,300,000 1,350,000 2008 2,500,000 1,400,000 1,300,000 1,250,000 1,300,000 1,600,000 1,550,000 1,950,000 1,540,000 1,300,000 1,400,000 1,325,000 YTD Fees Received 9,600,000 9,400,000 9,200,000 9,000,000 8,800,000 8,600,000 8,400,000 8,200,000 8,000,000 7,800,000 2010 8,825,000 2009 8,400,000 2008 9,350,000

Fiscal Year Net Income thru current month $3,950,000 $3,900,000 $3,850,000 $3,800,000 $3,750,000 $3,700,000 $3,650,000 $3,600,000 $3,550,000 $3,500,000 2010 3,725,000 2009 3,635,000 2008 3,890,000 Cash Balance $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 -$500,000 -$1,000,000 Jan Feb M ar Apr M ay Jun Jul Aug Sept Oct Nov Dec 2010 1,780,000 2,175,000 1,210,000 480,000 1,175,000 775,000 2009 2,245,000 2,200,000 2,200,000 555,000 915,000 520,000 475,000 725,000 875,000 1,600,000 1,540,000 1,625,000 2008 1,825,000 2,160,000 700,000 (45,000) (295,000) (425,000) 225,000 690,000 700,000 925,000 1,585,000 1,130,000

Accounts Receivable 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Jan Feb M ar Apr M ay Jun Jul Aug Sept Oct Nov Dec 2010 4,078,411 4,075,598 4,006,891 4,576,166 4,670,797 4,886,894 2009 1,331,787 1,599,394 1,262,312 2,139,204 1,520,939 1,427,149 1,544,122 1,451,982 1,680,234 1,402,073 1,530,661 1,641,076 Accounts Receivable > 120 days 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Jan Feb M ar Apr M ay Jun Jul Aug Sept Oct Nov Dec 2010 1,409,993 1,389,552 1,450,449 1,526,108 1,478,964 1,557,236 2009 1,362,429 1,345,470 1,273,919 1,352,777 1,482,944 1,547,191 1,564,228 1,690,891 1,672,485 1,594,092 1,578,160 1,482,741

Unbilled Fees & Disbursements 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Jan Feb M ar Apr M ay Jun Jul Aug Sept Oct Nov Dec 2010 1,580,019 1,509,433 1,706,520 1,795,547 1,514,408 1,655,001 2009 1,601,632 1,592,782 1,757,944 1,671,126 1,496,630 1,685,198 1,703,490 1,449,732 1,630,316 1,698,693 1,591,492 1,537,331 Unbilled > 120 days 1,000,000 800,000 600,000 400,000 200,000 0 Jan Feb M ar Apr M ay Jun Jul Aug Sept Oct Nov Dec 2010 667,508 686,033 720,035 725,103 648,345 630,263 2009 879,004 901,371 887,413 753,696 777,412 799,616 654,554 650,115 645,900 674,653 665,356 641,384