Three Ways Business Intelligence Informs Budget Planning

When we approach the budget and forecasting process, it is with a mixture of real data, assumptions about past performance, and instincts about the future. In most law firms, additional financial data to drive important budget decisions is desperately needed. Business intelligence software can significantly enhance the relevancy of data that was previously locked away in the accounting system. Easy access to this data is critical to law firm managers developing both the budget and firm's strategic plan. Here are just three of the ways that business intelligence software informs the budget planning process.

Monitor Cycles in WIP, Accounts Receivable, and Cash Receipts

Identify cycles in cash flow to better schedule expenses. Cash flow is king. Planning firm expenses to mesh with known cycles in cash receipts can lessen the impact of large outlays. While most standard report packages include some form of cash receipts information, the real-time visual representation of trends and cycles over the course of several years can highlight both rich and lean times for cash flow. Further monitoring of WIP and A/R cycles can help forecast which professionals or practice areas operate on an even keel versus those that by nature, clientele, or culture contribute to wild swings in cash flow for the firm.

Monitor New Business Cycles and Practice Areas

Understand when and where new business is most likely to occur for more accurate forecasting of both revenue and expenses. The anatomy of new business should no longer be the domain of the marketing department. Law firm managers can use business intelligence software to not only recognize who is originating new business but to understand what area of law it is in, how much revenue it produced, what is most profitable, and even predict when it will happen. Anticipating growth, and the resources it will require, can prepare the firm to take advantage of opportunities without squeezing the budget or stressing infrastructure.

Monitor Profitability by Professional

Analyze who is most profitable and how they practice to ensure the budget process supports continued success. Different areas of law require a different mix of resources, be it personnel, IT infrastructure, or space and travel requirements. The impact of expenses specific to a professional or practice area can be difficult to obtain, even with custom reports. Robust business intelligence software can take weighted expenses into account when evaluating profitability. It can also simplify reporting of data for compensation formulas. Law firm managers can translate this information into action items to build a budget that supports aspects of the practice that really sing and transform areas that do not.

Business intelligence software reveals critical information year-round, but it can be especially powerful when used to highlight a firm's strategic goals and measure performance against those goals. The budget planning process is a chance to draw on real data previously trapped in the financial systems and make the most accurate projections of both firm expenses and revenue. Firm managers that have access to critical financial data in an easy-to-interpret format can spend more time taking action instead of cobbling together data. Then, when building budgets with that data, they certainly have a better chance of getting it right.

Dimension Funding

Advanced Legal provides firms with a complete range of ProLaw services, including implementation, data conversion, customization, development, end user training, and support. The company also offers BIPro, a business intelligence and financial reporting software that includes profitability analytics, colorized charting, and multi-period trend analysis. Click here for more information.

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