improving your finances peter scott peter scott consulting

Improving your finances

Peter ScottPeter Scott Consultingwww.peterscottconsult.co.uk

http://www.peterscottconsult.co.uk/

PETER SCOTT CONSULTING

Make the most of what you have

You have - good clients - good people

Work smarter, not harderDo the basics better


Put the squeeze on every part of your business to achieve higher profitability


Avoid Financial Information OverloadMeasure 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

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


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?


• Work types • Client types

• Leverage (Gearing)

• Overheads

• Pricing• Matter related hours • Recovery rate

Profitability solutions


Pricing• Matter related hours • Recovery rate

Do the basics better

Build the top line


Who is never guilty of the ‘Triple Whammies’?

The TRIPLE WHAMMIES –

• Under pricing• Under recording• Under recovery


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

Do you price for profit?

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


• 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 = £15,0005 fee earners in total = £75,000

If…


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?


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


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…


30 minutes X 220 working days = 110 hours110 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…


Your recovery rate?

How much matter related time did youwrite off last year when billing?


If…

In this current year you reduce by half the amount you wrote off last year, by how much will your profits increase?

Recovery

1200 recorded hours at £200 per hour = £240,000W/O 200 hours = £40,000Recovery rate of 83% = £200,000

However if you can cut w/o by half

1200 recorded hours at £200 per hour = £240,000W/O 100 hours = £20,000Recovery rate of 91% = £220,000

Extra profit = £20,000X [ ] additional fee earners = £ ?


By reducing your …

Under-pricing Under-recordingUnder- recovery How much more profit could you make?


Your action plan to build your profitability?


Instructions W.I.P

Cash Debtors

Work

payment

billing

Take control of your cash management – cash is king

Work smarter, not harderDo the basics better


Put the squeeze on every part of your business


Avoid Financial Information OverloadMeasure 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?

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?

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’?

Lock up is a

RISKwhich needs to be managed

How are you risk managing your lock up?


Instructions W.I.P

Cash Debtors

Work

payment

billing

Taking instructions

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?


Instructions W.I.P

Cash Debtors

Work

payment

billing

How you manage your WIP is a reflection of how well you manage your clients

Are you a squirrel?

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?


Instructions W.I.P

Cash Debtors

Work

payment

billing

How you manage your debtors is a reflection of how well you manage your clients

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?


Your action plan to generate more cash?

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

Any questions?

improving your finances peter scott peter scott consulting

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