Special Report
Business Intelligence is more important to finance directors than ever before. We bring you a range of views on what 2010 could throw up in this critical discipline..
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Business intelligence for the legal sector |
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| Special Reports | |
| Written by David Edwards – Finance Director, Brodies LLP | |
| Friday, 22 January 2010 | |
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As Finance Directors we are often told that what we have produced has too many numbers, is too complex and too late!
While the information is invariably accurate, we need to ask ourselves, is it really useful? Why bother with BI systems?Change is needed. Within the Legal sector there is a fair understanding of income, costs and profit, and of the specific measures legal firms monitor such as utilisation (a measure of how productive an individual/department is). However there is, for example, far less understanding of, or indeed information on, individual client profitability or the effective recovery rate on fees collected. The key determinant of a good client in financial terms is not the level of fees but the profitability, and cash recovery. Now, more than ever, there is a need to clearly understand these underlying characteristics if businesses are to make the right decisions going forward. BI systems do not replace existing accounting systems. They augment these systems by efficiently converting masses of data into more meaningful information that will support more informed decision making. So what do you get?Despite what the vendors of such systems may say they are not a “plug and play” solution. These systems require a lot of initial management time to get the underlying data right. Once up and running the BI system is a powerful ally. At a practical level it enables more creative approaches to fee structuring on client proposals, which benefit the client and also allow FDs to clearly and accurately forecast, and track profitability. As many of us have rediscovered, “Cash is King”. BI systems have allowed a more granular analysis of the portfolio to be performed to help unlock cash “locked up” in the business. Is it just a toy for the FD to play with?Absolutely not! If FDs think this they are missing the point. From a financial planning perspective, Business Intelligence systems allow a freeing up “process time” and creation of “thinking time” and, ultimately, cost reduction. The benefits for other key support functions within a law firm are also invaluable. Marketing departments, for instance, can identify the richer seams of business to pursue and garner a wider understanding of the client base from which to develop marketing strategies. HR departments can clearly see the true profitability of individuals which is a valuable source of data in any appraisal/promotion situation. Putting these specifics to one side for a minute though, the real plus of BI systems is that they enable Finance departments to take meaningful financials to the people in the business who make the decisions. I started this piece by saying that FDs are often criticised for presenting information that is too complex. The key to any successful deployment of BI systems is to ensure that the end product can be used by the business decision makers. It has to present the information in a way that can be understood quickly and with little explanation. Indeed, taking the key influencers through the journey from initial vendor presentation to having it on their very own desktop is essential. If as FDs we cannot envisage the true decision makers in our businesses using these BI systems, there is little point in the investment. We need to strive to help them see the true value of such systems in the modern business world.
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