Practically Applying Business Intelligence

With more than 38,000 open matters at any given time, summarizing and analyzing practice, client and attorney information was nearly impossible to do efficiently using manual process and flat reporting. We did our best to create reports (eg, work in process (WIP), realization (amount collected as compared against amount worked/billed) and performance) using available technologies, including our time and billing system (Elite), Excel, Access and custom reports. However, we were eager to find a way to conduct more sophisticated analysis. We knew the questions that we wanted answered, but had been unable to get at the information in a usable format. For example, we could get general reports about aging accounts receivable (A/R), but we weren't able to assess real performance as it related to each client's historic payment pattern. If our firm averages a 75-day turn around on receivables and Client A has invoices 60 days old and Client B's are 90-days out, is that good or bad? We needed more detail than we could get from our transaction-based systems in order to answer these types of questions.

We decided it was time to implement reporting-based business intelligence (BI) software. Essentially, BI software sorts through vast amounts of firm data (from disparate sources such as time and billing, general ledger, payroll, etc.), automating the number crunching and analysis to provide us with actionable information and a more focused approach to following up on that information. Over a 1-year period, we reviewed software and services from four vendors, including our accounting system vendor and third party providers.

We selected Redwood Analytics because they are business and finance professionals that specialize in developing data warehouses and analytic cubes (note: defined below) specific to law firm performance. Once developed, Redwood's application provides a multi-dimensional analytic platform (Cognos) to generate reports. What the analytic cubes do is take information into the data warehouse and reorganize it in order to answer a specific analytic question (eg, Which practice group is most profitable?), the information is then presented in a way that can be readily manipulated by the end-user. As such, the end-user can easily analyze, slice and dice, look at cross sections and create reports from the data without having to understand query language or how to join database tables.

Redwood performed an initial configuration for us in one week, and then fine-tuned it to our specification during a 2-week period. For example, we added unique fields/dimensions to capture client originating and matter originating attorneys. We were also able to add geographical hierarchies to quickly and easily analyze our business in the sections in which we are accustomed. We had our first analyses for measuring client investment and profitability live within 30 days. In addition to me, the firm's Assistant Controller and Manager of Special Projects also directly use BI, and information generated is shared with partners and firm management.

Specifically, we've been able to apply BI to improve firm performance in the following areas:

Pricing. Clients often come to us asking for special pricing or alternative billing arrangements. BI enables us to model pricing and staffing scenarios to ensure profitability prior to agreeing to a particular rate. Now, when a client comes to us with a request for a blended rate, we're able to model the matter staffing to see if the matter meets our requirements for profitability, and if not, either adjust the staffing or counter with a more appropriate blended rate. By properly pricing matters, we're able to keep our rates competitive and improve collection turn-around (the speed in which we receive payment).

Staffing. Staffing is a science that directly relates to firm growth and profitability. With BI, we can identify the best way to leverage timekeepers in order to profitably staff matters. We can analyze skill sets, availability and billable rates in order to develop an optimal staffing mix. In this way, we can account for capacity (productivity of each timekeeper as measured against overall firm workload), an often overlooked component in profitability analysis. Also, it allows us to look beyond pure academic analysis and get a feel for the types of billable work that are interchangeable and can essentially be completed by any timekeeper in that timekeeper's class (eg, confidentiality agreements), versus work that is more specialized and can only be completed by select timekeepers (eg, international patent).

Collections. We're able to easily analyze the age of each receivable or WIP against each client's history. This has been invaluable because each day we can clearly identify potential collections or billing problems and then target them for immediate follow up. In fact, this capability provided us with an immediate ROI. We implemented BI in the fourth quarter 2003 and it helped us meet our collections budget for that same quarter. More importantly, firms can bill a great year, but have it all fall flat in December due to outstanding receivables. Now, we're able to take a steadier, year-round approach to collections and less of an end-of-year push. In fact, we met our December collections budget and exceeded our 2003 revenue budget with the help of BI.

Profitability. Our profitability analysis is now automated and enables us to evaluate overall firm performance as well as performance per office, practice group, attorney and client. Further, we're able to go beyond top-level reporting and can drill down in each area to identify the key drivers of profitability (pricing, utilization, realization, speed, etc.) on a prospective, as well as a retrospective, basis. Further, BI helps us translate the output into something easily digested by management, such as by translating difficult to interpret profit margins into per-hour measurements.

We are now looking to expand our BI functionality to assist in business development and marketing efforts so we can bring the same level of science to bear on our marketing and entertainment efforts, as well as budgeting and forecasting. For example, we will soon be able to budget revenues for the year, from diary to cash at a timekeeper level, using historic patterns from our warehouse, and then revise the forecast on a monthly basis.

Overall, BI has saved time, enabled us to easily access and analyze information, strengthened exception reporting, provided clear-cut actionable reports, and given us a more focused approach to firm management. As a direct result of these benefits, our investment in BI paid for itself within 60 days of going live.

With more than 38,000 open matters at any given time, summarizing and analyzing practice, client and attorney information was nearly impossible to do efficiently using manual process and flat reporting. We did our best to create reports (eg, work in process (WIP), realization (amount collected as compared against amount worked/billed) and performance) using available technologies, including our time and billing system (Elite), Excel, Access and custom reports. However, we were eager to find a way to conduct more sophisticated analysis. We knew the questions that we wanted answered, but had been unable to get at the information in a usable format. For example, we could get general reports about aging accounts receivable (A/R), but we weren't able to assess real performance as it related to each client's historic payment pattern. If our firm averages a 75-day turn around on receivables and Client A has invoices 60 days old and Client B's are 90-days out, is that good or bad? We needed more detail than we could get from our transaction-based systems in order to answer these types of questions.

We decided it was time to implement reporting-based business intelligence (BI) software. Essentially, BI software sorts through vast amounts of firm data (from disparate sources such as time and billing, general ledger, payroll, etc.), automating the number crunching and analysis to provide us with actionable information and a more focused approach to following up on that information. Over a 1-year period, we reviewed software and services from four vendors, including our accounting system vendor and third party providers.

We selected Redwood Analytics because they are business and finance professionals that specialize in developing data warehouses and analytic cubes (note: defined below) specific to law firm performance. Once developed, Redwood's application provides a multi-dimensional analytic platform (Cognos) to generate reports. What the analytic cubes do is take information into the data warehouse and reorganize it in order to answer a specific analytic question (eg, Which practice group is most profitable?), the information is then presented in a way that can be readily manipulated by the end-user. As such, the end-user can easily analyze, slice and dice, look at cross sections and create reports from the data without having to understand query language or how to join database tables.

Redwood performed an initial configuration for us in one week, and then fine-tuned it to our specification during a 2-week period. For example, we added unique fields/dimensions to capture client originating and matter originating attorneys. We were also able to add geographical hierarchies to quickly and easily analyze our business in the sections in which we are accustomed. We had our first analyses for measuring client investment and profitability live within 30 days. In addition to me, the firm's Assistant Controller and Manager of Special Projects also directly use BI, and information generated is shared with partners and firm management.

Specifically, we've been able to apply BI to improve firm performance in the following areas:

Pricing. Clients often come to us asking for special pricing or alternative billing arrangements. BI enables us to model pricing and staffing scenarios to ensure profitability prior to agreeing to a particular rate. Now, when a client comes to us with a request for a blended rate, we're able to model the matter staffing to see if the matter meets our requirements for profitability, and if not, either adjust the staffing or counter with a more appropriate blended rate. By properly pricing matters, we're able to keep our rates competitive and improve collection turn-around (the speed in which we receive payment).

Staffing. Staffing is a science that directly relates to firm growth and profitability. With BI, we can identify the best way to leverage timekeepers in order to profitably staff matters. We can analyze skill sets, availability and billable rates in order to develop an optimal staffing mix. In this way, we can account for capacity (productivity of each timekeeper as measured against overall firm workload), an often overlooked component in profitability analysis. Also, it allows us to look beyond pure academic analysis and get a feel for the types of billable work that are interchangeable and can essentially be completed by any timekeeper in that timekeeper's class (eg, confidentiality agreements), versus work that is more specialized and can only be completed by select timekeepers (eg, international patent).

Collections. We're able to easily analyze the age of each receivable or WIP against each client's history. This has been invaluable because each day we can clearly identify potential collections or billing problems and then target them for immediate follow up. In fact, this capability provided us with an immediate ROI. We implemented BI in the fourth quarter 2003 and it helped us meet our collections budget for that same quarter. More importantly, firms can bill a great year, but have it all fall flat in December due to outstanding receivables. Now, we're able to take a steadier, year-round approach to collections and less of an end-of-year push. In fact, we met our December collections budget and exceeded our 2003 revenue budget with the help of BI.

Profitability. Our profitability analysis is now automated and enables us to evaluate overall firm performance as well as performance per office, practice group, attorney and client. Further, we're able to go beyond top-level reporting and can drill down in each area to identify the key drivers of profitability (pricing, utilization, realization, speed, etc.) on a prospective, as well as a retrospective, basis. Further, BI helps us translate the output into something easily digested by management, such as by translating difficult to interpret profit margins into per-hour measurements.

We are now looking to expand our BI functionality to assist in business development and marketing efforts so we can bring the same level of science to bear on our marketing and entertainment efforts, as well as budgeting and forecasting. For example, we will soon be able to budget revenues for the year, from diary to cash at a timekeeper level, using historic patterns from our warehouse, and then revise the forecast on a monthly basis.

Overall, BI has saved time, enabled us to easily access and analyze information, strengthened exception reporting, provided clear-cut actionable reports, and given us a more focused approach to firm management. As a direct result of these benefits, our investment in BI paid for itself within 60 days of going live.