1. Improving your finances Peter Scott Peter Scott Consulting www.peterscottconsult.co.uk

2. PETER SCOTT CONSULTING Make the most of what you have You have - good clients - good people Work smarter, not harder Do the basics better

3. PETER SCOTT CONSULTING Put the squeeze on every part of your business to achieve higher profitability

4. PETER SCOTT CONSULTING Avoid Financial Information Overload Measure what matters Review your financial measurement and reporting “If you cannot measure it, then you will not be able to manage it” Are you measuring what matters? KEEP IT SIMPLE

5. Financial measurement and reporting should provide clear information to those running the business to enable them to: - Know what is happening / will happen in the business - Make decisions based on sound knowledge - Take effective action - To manage performance PETER SCOTT CONSULTING

6. Your financial measurement and reporting? Do you produce raw data or good quality information? Do your KPIs tell you what you need to know about the profitability of your business? How do you use the financial information you produce? Is your financial measurement and reporting helping or preventing you achieving your profitability objectives?

7. PETER SCOTT CONSULTING Work types Client types Leverage (Gearing) Overheads Pricing Matter related hours Recovery rate Profitability solutions

8. PETER SCOTT CONSULTING  Pricing Matter related hours Recovery rate Do the basics better Build the top line

9. PETER SCOTT CONSULTING ‘Triple Whammies’? Who is never guilty of the ‘Triple Whammies’? The TRIPLE WHAMMIES – Under pricing Under recording Under recovery

10. PETER SCOTT CONSULTING Efficiency is Key Efficiency = Utilisation x Recovery Utilisation = matter related hours recorded as a % of standard working hours (220 days x 7 hours = 1540) Recovery = % of recorded matter related time billed

11. Do you price for profit?

12. Pricing work for profit – some essential elements 1. Competitive pricing 2. Scoping the work 3. Analysing the risks 4. Budgeting for work – with knowledge 5. Offering one, or many, tailored solutions for a budget 6. Negotiating the price

13. PETER SCOTT CONSULTING You / each fee earner records 1500 hours p.a. Increase your rates by £10 per hour and fully recover How much more profit will you generate in a full year? Sole practitioner alone = £15,000 5 fee earners in total = £75,000 If…

14. PETER SCOTT CONSULTING Matter related hours Your firm’s leakage? Do you know how much time which should properly be billed to your clients you are losing each year by under recording? How good are you at recording time? How frequently are you monitoring the recording of matter related time by your fee earners? What actions do you take?

15. PETER SCOTT CONSULTING Who thinks that they and others in their firm ‘lose’ at least 30 minutes of matter related time per day?

16. PETER SCOTT CONSULTING You and other fee earners in your firm record and recover an additional 30 minutes per day How much more profit would you make in a full year? If…

17. PETER SCOTT CONSULTING 30 minutes X 220 working days = 110 hours 110 hours x say £200 per hour = £22,000 additional profit per fee earner 5 fee earners = £110,000 additional profit An extra 30 minutes recorded daily (if fully recovered) will produce…

18. PETER SCOTT CONSULTING Your recovery rate? How much matter related time did you write off last year when billing?

19. PETER SCOTT CONSULTING If… In this current year you reduce by half the amount you wrote off last year, by how much will your profits increase?

20. Recovery 1200 recorded hours at £200 per hour = £240,000 W/O 200 hours = £40,000 Recovery rate of 83% = £200,000 However if you can cut w/o by half 1200 recorded hours at £200 per hour = £240,000 W/O 100 hours = £20,000 Recovery rate of 91% = £220,000 Extra profit = £20,000 X [ ] additional fee earners = £ ?

21. PETER SCOTT CONSULTING By reducing your … Under-pricing Under-recording Under- recovery How much more profit could you make?

22. PETER SCOTT CONSULTING Your action plan to build your profitability?

23. PETER SCOTT CONSULTING InstructionsW.I.P CashDebtors Work payment billing Take control of your cash management – cash is king Work smarter, not harder Do the basics better

24. PETER SCOTT CONSULTING Put the squeeze on every part of your business

25. PETER SCOTT CONSULTING Avoid Financial Information Overload Measure what matters Review your financial measurement and reporting Are you measuring what matters for cash generation? How much do you have invested in your clients?

26. Your ‘lock-up’ (the amount your firm has invested in your clients) is a RISK “lock-up” (work done not paid for) =  WIP  Unbilled / unpaid disbursements  Unpaid bills How good are your clients as an investment?

27. How old is your “lock up”?  Your aged WIP? (the older your WIP the less likely it will be billed)  Your aged Debtors? (the older your debtors the less likely they will be paid) How much of your lock up is ‘at risk’?

28. Lock up is a RISK which needs to be managed How are you risk managing your lock up?

29. PETER SCOTT CONSULTING Instructions W.I.P CashDebtors Work payment billing Taking instructions

30. Taking instructions = risk management  You are providing clients with credit, but you are not trained or being paid to take credit risk  Client vetting / credit checks  Money on account  Disbursements  Credit limits  Interim / frequency of billing  Payment terms  What else should you put in your Terms of Engagement?

31. PETER SCOTT CONSULTING Instructions W.I.P CashDebtors Work payment billing How you manage your WIP is a reflection of how well you manage your clients

32. Are you a squirrel?

33. Your WIP management?  Do you agree with clients to monthly / interim bill?  Do you always agree bills with clients before delivering them?  How much of your existing WIP can be billed NOW?  Will 100% of your WIP be billed?  Do you set yourself WIP targets?

34. PETER SCOTT CONSULTING Instructions W.I.P CashDebtors Work payment billing How you manage your debtors is a reflection of how well you manage your clients

35. Your debtors management? Payment terms? The age profile of your debtors? Review all unpaid bills over 30 days When did you last speak to a client about payment of a bill? Can you say 100% of your debtors will be paid?

36. PETER SCOTT CONSULTING Your action plan to generate more cash?

37. What are you going to take away from this session and do something about?

38. Any questions?