2012 Redwood Analytics® User Conference Analysis. Insight. Action. Billing & Collections 101: Best Practices for Managing Firm Finances Stuart Allen Product Manager

2012 Redwood Analytics® User Conference Analysis. Insight. Action. Billing & Collections 101 Inventory Management Revenue Management Tracking Time Entry

2012 Redwood Analytics® User Conference Analysis. Insight. Action. Inventory Management

3 Key Inventory Questions How old are my WIP and A/R? How quickly can I bill/collect that work? What happens if I don’t do so in a timely fashion? How can I quantitatively tell which A/R to go after first?

4 Age of Inventory (Billed + Unbilled) Age refers to “how old is it in days” Dollar weighted average ex. Age of A/R = (Amount x Days)/Total Bill DateToday’s Date Elapsed Days AmountAge of A/R Feb 1Mar 128$10028 Jan 1Mar 159$40059 Total:$50053 Age of A/R = [(Days x Amount) + (Days x Amount)]/ Total Age Metrics

5 Days of Inventory (Unbilled + A/R) Days is a measure of activity Lower number indicates activity increasing vs. production Current Balance / Daily Avg. R12 Periodic Billing Amount ClientAvg. Daily BillingsUnbilled BalanceDays of Unbilled A$1/day$ B$2/day$ C$20/day$ Total$23/day$ Days Metrics

6 Forward Realization Curve Risk Adjustment Likely to Bill / Collect At Risk Forward Billing / Collection Realization %

7 Expected Pay Time Based on a clients history, when we expect payment on an invoice Not dependent on age of invoice but rather past client activity Relevancy An Expected Pay Time is only as relevant as the quality of the client’s history Index of 0 – 9 reflecting “relevancy’ of Expected Pay Time measure 9 = very relevant, 1 = not relevant, 0 = clients with no history Based on the Client level NOT the Related Client/Parent Client level

8 Client ABC Pays invoices every 30 days for 2 years High Relevancy Expected Pay Time = 30, Relevancy = 8 Client XYZ Paid 2 invoices; 1 st invoice in 1 day, 2 nd invoice in 200 days Low Relevancy Expected Pay Time = 100 [( )/2], Relevancy = 2 Client LMNOP Has never paid an invoice (no history) Relevancy = 0, Expected Pay Time = 60 Examples of Expected Pay Time/Relevancy

9 Expected Pay Time/Relevancy

10 Balance Statuses Expected Pay Time allows the use of Balance Statuses to define opportunities for collections Timely – Invoices <= Delinquency Date, Not Past Expected Pay Time Opportunities – Invoices Past Expected Pay Time Delinquent – Invoices > Delinquency Date, Not Past Expected Pay Time Potential Charge-off – Invoices > 365 Days regardless of Expected Pay Time Unbilled – All WIP

11 Expected Pay Time / Balance Statuses

12 Track Progress Over Time What can be done to normalize the bill and collection speeds?

2012 Redwood Analytics® User Conference Analysis. Insight. Action. Revenue Management

14 Key Revenue Questions Where am I losing money from work to collection? How much can I expect to bill/collect in the future? At what speed am I currently billing/collecting? How do I improve?

15 Static versus Periodic Concepts

16 Hours Worked 686,729 Std Amt $136,923,140 Unbilled Amt $15,935,928 Billed Amt $110,278,974 Collected Amt $94,975,205 Uncollected Amt $13,938,782 Periodic Bill Amount $123,877,365 Periodic Collect Amount $121,492, Work Period – 2012

17 Disposition of an Hour

18 Actual Bill Amt $137,358,623 Write-off Amt $2,057,322 Uncollected Amt $15,950,691 Collect Amt $119,350,610 Bill Period – 2012 Periodic Collect Amount $121,492,854 Periodic Write-off Amount $11,412,

19 Reversals Jan 2012Feb 2012Mar 2012 Billed Amt. (Actual) $500 Periodic Bill Amt. $500 Jan 2012Feb 2012Mar 2012 Billed Amt. (Actual) $400$500 Periodic Bill Amt. $500 $400 *The effect of a $100 reversal in March based on invoice originally billed in January

20 Disposition of a Bill

21 Work Period Analysis Discounting Ability to catch losses in revenue as they occur each month rather than retroactively

22 Maturity Factors in Work Period

23 Maturity Factors in Work Period Unbilled Amount Bill Speed

24 Bill Period Analysis What happens to the bill? Ability to view bill (less reversals) and the story of what’s happened to that bill over time – by Billing Attorney, Office, etc.

25 Bill Period Analysis Bill Maturity Not a Factor This view, anchored to the bills generated in a given period, allows for true, mature speed metrics

2012 Redwood Analytics® User Conference Analysis. Insight. Action. Time Tracking

27 Quickly target time entry bandits

28 Is Time Entry Consistent Across Practices?

29 Review of B&C Concepts Inventory Indicates inventory levels/indicators at incremental points in time Use when interested in analyzing past performance and looking for specific trends in inventory, A/R, and WIP Daily Inventory Nightly Build, Invoice Level, Fees & Costs Most up-to-date look at current inventory, A/R, & WIP Use when interested in influencing change now or when you need a recent picture of your firm’s inventory status

30 Review of B&C Concepts Work Period Starting at the hour worked, what occurred to those hours going forward? Use when interested in working attorneys, departments, etc., or when you are interested in understanding factors relating to production Bill Period Starting at the invoice, what occurred to the bill going forward Use when interested in bill attorneys and the performance related to your billing practices

31 Review of B&C Concepts Hours Hygiene Allows for daily analysis of timekeeper hours and trends related to those hours over time. Use when interested in hours entry and analyzing the time gaps that may exist between when work is performed versus entered into the system

2012 Redwood Analytics® User Conference Analysis. Insight. Action. Billing & Collections 101: Best Practices for Managing Firm Finances Stuart Allen Product Manager