Profitability – How to drive Shareholder Focus Presented by: Nancy Griffing 35★45 Consulting http://3545consulting.com Lexis Practice Management Account Executive

Nancy Griffing 35★45 Consulting Managing Member http://3545consulting.com ngriffing@3545consulting.com

Profit - What’s in it for the firm? Gain insight into the key metrics that impact profitability at your firm Know and understand the “carrying costs” for your timekeepers Determine profitability by Timekeeper, Client/Matter or Practice Class Drill down to determine which clients (and timekeepers) are making the most money for your firm Learn to understand the ‘why’ behind your financial numbers Determine where to focus your resources to drive more profitable lines of work Identify areas you can leverage to increase profitability Compare results year-to-year to determine trends and areas of improvement

What are Timekeeper Key Metrics?

What motivates timekeepers? Consistent Measurements Timely Reports Clearly Defined Incentive Programs Feedback on Billable, Billed and Collected $ Understanding “Partner Motivation”

Utilization – Bill what you work! Utilization: How timekeepers use time on billable vs. non-billable activities. Establish time and expense tracking rules by client and practice areas and enforce them. Validate compliance when entering data to simplify bill creation and reduce rejected bills Provide attorneys and staff with real- time views of actual billings vs. goals Record billable time as it is earned – contemporaneously.

55-70% Correct Under-Earning Habits   The Problem 55-70% Lost billable time per month when trying to reconstruct their time weekly. (Attorney at Work blog, June 14, 2013) The Problem: “Lawyers who reconstruct their time weekly tend to lose 25 to 30 percent of their time, and those who enter on a monthly basis can lose as much as 55 to 70 percent.” (Attorney at Work blog, June 14, 2013) Signs of Under-Earning: Entering time and expenses weekly or monthly Frequent discounting of rates to clients Heavy reliance on write-downs “Attorneys don’t always understand how the adjustments they make on WIPs determine their Effective Hourly Rate, and the impact they can have on the firm’s bottom lin. With Juris, I can drill down, show him his history and show how the adjustments affected his hourly rate.” Joseph Revell, Administrator, Campbell Kyle Proffitt LLP Provide tools that make time easy to enter and contemporaneously when work is being performed!

Timekeeper Goals should be easy to see

Utilization – Collect what you work and bill! Utilization:  How much is ultimately collected versus the effort expended. How accurately can you track write- offs from your original worked amount? Are your billings going to the clients in a quick and efficient manner? What are your policies on tracking AR and how quickly are you paid? Do you have collections policies & practices in place?

What do Financial Statements Tell You ?

Balance Sheet vs Income Statement Debit Credit Assets Liabilities Income Capital Expenses Debit Credit A   L I C E ALICE Read the Balance Sheet to Understand Profit & Loss (Income Statement) Determine what shows on the Financial Statements and what is Productivity Are you “Shooting the Dead” or “Changing your Destiny”?

Does your Income Statement answer the right questions? What is your fixed overhead? What are your YTD comparatives? Can you predict year end profit? Can you predict cash flow? What is your monthly thermostat for measuring success?

Year to Date through August, 2015 Can you produce P&L by title? Year to Date through August, 2015

Can you produce P&L by Person? Period Ending August, 2015

2015 Profit & Loss Statement Can your produce P&L highlights? Grouped Detail 2015 Profit & Loss Statement

Taking it to the “Client Level…”

75 Days Collect What’s Yours! The Problem 75 Days On average firms with 25-40 attorneys have 75 days of collections in fees receivable The Solution: Track and centralize the account history for all overdue accounts to manage the collection action plan Promptly notify clients who are delinquent in paying their past due accounts Schedule reminder alerts to ensure client follow up Systematically analyze aged accounts receivable reports to spot overdue accounts Don’t be part of this statistic – put policies in place now to proactively manage your outstanding AR and collections.

Which clients generate profit? Are all of your clients worth keeping?   Is your largest client or practice area really the one bringing in the most money? Which types of clients & practice areas deserve your marketing dollars? Which Timekeepers should I assign to which Clients to increase profitability? Questions you should be asking about your clients: Running a profitable business is not about luck or chance, it’s about managed thought, focused attention to detail and deliberate action based on comparable consistent data.

Management reports should be quick & easy to digest! Client Net Profit Attorney Cost/Hr rate Multiplied by: Billable Hours Worked = Total Expenses Less: Cash Received on posted bills Equals: Net Profit (Loss)

Taking it to the “Next Level…” Getting your information should be easy from a good financial management tool but you need to take it further…. Discuss what do these numbers really mean? How can this be true? Where can we Improve? Knowing the underlying costs enables the firm to price aggressively in the market…..!!! Charting your course for the future by looking at year over year trends.

Thank you! Nancy Griffing 35★45 Consulting Managing Member http://3545consulting.com ngriffing@3545consulting.com Thank you!