Financial matters are situated in heart of every business (as well as many other private and non-business operations). It is no different with legal projects and legal matters – money counts. As finance professional with more than 15 years of experience in profession I can share few tips and mention few areas important for getting finance side right.
BUDGETS – budgetary plans often do not survive contact with reality but lack of budgeting for legal projects is a simple way to financial issues. It is also important to mention that budgetary plans are sometimes of limited value, but the process of budgeting itself can be bring various insights to business. Budgeting in some areas (for example legal technology investments) requires experience and structured approach.
REGISTERING EXPENSES AND REVENUE – in order to properly understand the financial data it is crucial to accurately capture it. Accounting should be performed and followed with proper maintenance and storage of data. This is allowed through proper accounting process, reliable financial data gathering and analysis tools and good data governance,
ESTIMATES – on top of expenses and revenues coming from “hard invoice” there is also important area of possible items which do not come in exact monetary value, and yet should be part of financial planning and monitoring. Those items can come only as estimates, but leaving them aside would be lowering the quality of financial data – the examples can be cost of risk and cost of lost opportunities,
ALLOCATION DRIVERS – having accounted and estimated properly the data it needs to be allocated to projects or matters in reasonable and consistent way. In the past of legal projects and matters almost sole driver was time spend. Today with technology assisting (or providing) part of the services the topic of assigning drivers allocating expenses and revenues to matters and project is not so simple,
COST ALLOCATION – some areas of business operations are more difficult that others to allocate to particular legal project or client. The examples can be fixed cost, cost of client development activities, marketing expenses. It is very important to take the difficult exercise and reasonably try to allocate those costs to clients, matters and projects. The allocations are rarely extremely exact, but the important thing is to do it on reasonable way and remain consistent,
PROFITABILITY – the core financial indicator for legal project or matter or client is profitability (i.e. ability to generate return over investment). With Client profitability being slightly easies (revenue stream usually available) the profitability or return over legal project (its business case) is often more difficult to estimate,
BILLING – activity which is seen as relatively administrative financial task can be source of different risks (missed or inaccurate billing). Getting billing and collection wrong can lead to client dissatisfaction and liquidity issues,
PERFORMANCE MONTIROING – although financial ratios and indicators are not the only ones in the properly constructed legal project monitoring dashboard, they provide a lot of data related to LEGAL project or matter. It is crucial to choose and maintain the proper set of ratios (you get what you measure) and keep them consistent for performance monitoring, RECONCILIATION – as presentations and dashboards will accept any information (especially presentation slides) it is especially important that financial data used to drive