Case study: Clarke Willmot

Forecasting finance: the role for IT

The idea of accountants spending three months immersed in spreadsheets as part of the annual budget process might sound to some like heaven on earth. Why move away from the tried and tested spreadsheets of old and look at new and potentially expensive technology to assist with the budgeting process? Why try to fix something that isn’t broken?
Many firms that leverage technology to streamline and strengthen controls and processes still don’t take advantage of software available to automate the budgeting and forecasting processes. The manual input, manipulation and consolidation of data are not only an inefficient use of resources but also open the firm up to control risks and human error. The process tends to be an under-utilised financial-management tool, concentrating on income targets instead of establishing clear measures for evaluating performance around controllable drivers.
In addition, the annual process can be time consuming. Technological solutions offer enhanced forecasting capabilities with the ability to test ‘what if’ scenarios in a streamlined, reliable and time-efficient way.
Our own experiences at Clarke Willmott – a UK law firm with 65 partners delivering a turnover of £45m – were no different. Our budgeting technology was limited and making changes to the structure and content of the budget was difficult. As much time and energy was spent managing the process as evaluating the data, and year-end time constraints often meant that performance issues were not fully addressed.
Our approach became one of looking at growth, contribution and hours, and as long as the main key performance indicators (KPIs) were achieved, the core data was not interrogated further.
We realised that we needed a more sophisticated high-end approach to our budgeting process, which was becoming more complex as the firm expanded. We were also keen to move to a more commercial approach, one that didn’t just view budgeting as an annual tick-box exercise but a more progressive business-performance approach that allowed us to integrate with other financial tools, monitor and report actual performance against budget and reforecast as necessary to reflect real-time business scenarios.
To achieve this we needed to automate and stabilise the data and identify an appropriate tool that allowed us to deliver all of the above.
In this article, I will run through our approach and experiences in leveraging an IT solution into our budgeting and forecasting process, and highlight our achievements and problems from a top-60 firm perspective. More specifically, I will touch on:

Software options that are available and appropriate to a firm of our size and aspirations;
Implementation and minimising the cost and disruption to the business;
Our first-year experiences in applying a software solution to the budgeting process.

What options are available?
Identifying an application that was specific to the legal profession proved to be a little harder than anticipated.
A selection of packages was available, but few of them were specific to the legal profession. Some practice-management-system (PMS) providers were offering associations. Elite, for example, had formed a relationship with Clarity Systems, but we felt that this specific solution would have required a considerable amount of input from the finance team, in both configuration and design. We didn’t have the time or expertise to go down this route.
Other out-of-the-box solutions simply weren’t geared to the legal profession and were, therefore, inappropriate. At this point we decided to contact Tikit for advice. Tikit is a provider of IT services and software to the legal and accounting industries, working with 89 of the top law firms. It is a large organisation, which had established a reputation for working with best-of-breed solutions. We felt, given their exposure to the legal profession and the relationships that they had with software providers, they might be able to offer some guidance on potential budgeting and forecasting solutions.
Tikit had recently formed a partnership with Redwood Analytics. Redwood is a provider of business-intelligence software designed specifically for the legal profession. As Redwood representatives were in the UK, they were able to demonstrate to us their budgeting and forecasting solution, an online application that allows users to create budgets based on past performance and actual hiring practices. The collection of data, through industry specific templates, is received directly from budget holders. The templates are updated throughout the process, thereby replacing the time-consuming need for manual distribution of spreadsheets at every stage of the process and the re-keying of core data.
In summary, Redwood was able to offer Clarke Willmott:

Data collection and aggregation in real time;
Established links to data sources, which in our case was our PMS solution, Elite;
Modular based workflow management tools;
Automated consolidation;
Real-time multi-dimensional analysis;
Multi-user functionality.

The decision to select Redwood was determined by the system’s ability to deliver the step change needed to transform our budgeting process. More importantly, the system was scalable, easy to use and maintain, and quickly installed and project managed by Tikit, supported by the Redwood team in the US.

Implementation and minimising the cost and disruption to the business
Having the right solution was only half the battle. To change our budgeting and forecasting process, and get a rapid return on investment, we had to ensure that the implementation of our new application was properly configured and implemented in the shortest period of time, without compromising on quality.
Clarke Willmott had a small window of opportunity, September to December, in which to implement the new system before the annual budgeting process began. In hindsight, it would have been better to start the process a little earlier as there was some overrun while the system was fine tuned; but, on the whole, the implementation ran smoothly and disruption was kept to a minimum.
The success and timeliness of the project was down to several factors that were discussed and monitored throughout the project by the implementation team.
These included:

Identifying the deliverables properly at the beginning of the project;
Designing and testing the application well before the live date;
Applying the right level and expertise of resources to the project, as well as providing good project management.

Other less quantifiable factors that assisted with the process was our willingness and interest to change the old processes and start afresh, without trying to replicate what had taken place in the past. We went into the project with a completely open mind, wanting to apply best practice. Trying to replicate or just trying to automate current practices might have limited the application’s full capabilities as its real value is in integration with other analytical and reporting platforms, and its business-performance-management process. In addition to this was the excellent working relationship between Clarke Willmott and the development team, which I think was instrumental to the success of the project. There were concerns at the start that project management would suffer from the team involved being split between the UK and US, but regular conference and video calls proved to be a great success and allowed us, as end users, to engage with the developers to achieve the desired outcome.
With its vertical focus, Redwood serves many geographies and was experienced in dealing with remote implementations. The implementation plan was designed to take the pressure off the Clarke Willmott team, although having an internal resource who understands the application and the platform on which it sits is definitely an advantage, which assisted in the delivery of the end product.

Our first-year experiences in applying a software solution to the budgeting process
The project was designed as a staged process. Stage one was to develop the basic functionality of the application. Developing the added-value functions would then take place over a longer period of time. Stage one successes include:

Increased ability to make managers responsible resulting from improved transparency over how their decisions impact results;
Increased manager engagement in the process and end result of the budget;
Improved interrogation and business planning of recruitment.

The additional functionality of the application, which included multi-layering of teams and structures, and drill-down on performance, was an immediate and significant step forwards for the firm in terms of timely and accurate consolidation and performance analysis.
Managers are now able to drill down and address underperformance, and exploit targeted opportunities, instead of applying a blanket approach to all members of the team.
The enhanced levels of detail available to the managers through the implementation of Redwood did cause some managers to question the validity of the data. We found that though the managers were comfortable with each component of the analysis, they thought the end result was unrealistic. This situation could have been improved through additional training, but the fact that they were engaged and probing the analysis was a real benefit, as they learnt about the application and the detailed performance of their team.
At a firm level the new application has freed up management time and allows for analysis at a more strategic level. Dynamic comparisons between offices, teams and fee earners helped identify exceptions that could be investigated, which previously would have been overlooked. This has added greater depth to the budget process.
There was an immediate improvement in relation to the planning and control of new hires, which now flows through into the recruitment process of the business. Budgeted new hires are clearly identified and non-budgeted hires are required to produce and monitor business cases to justify the additional cost.
The only area that proved a little more complicated was the production of a standard balance sheet and cashflow. We were aware of the differences between the US cash basis and UK accruals basis at the start of the project and knew that we would need to work closely with the development team to develop the UK version of these financial reports.
We are now looking to develop added-value functionality, which is the really exciting part of the project. As the application has the ability to integrate with other applications we are looking to develop the monthly reporting and analysis of actual results against budget, direct in the Redwood application, and exploit the reporting capabilities of the Redwood system. This will improve the turnaround of monthly statements and start to fuse monthly reporting with the annual budget process.
In addition to this, we are looking to develop the forecasting and investment appraisal capabilities of the system to improve the speed of reaction to business changes. We also want our managers to be an integral part of the system and to have ownership of the financials of their teams.
Although basic functionality is available, we are looking to mirror the annual budgeting process and format to give the managers the ability to reforecast any material changes to their team or environment directly into the system, highlighting the effect that any changes will have on forecasted year-end results and to identify any remedial action that may be required. This will make the financial reporting more dynamic and relevant, less reactive and more proactive to business changes.
In conclusion, I believe that our determination to enhance and add value to the budgeting and forecasting process, working alongside a best-of-breed technical solution, has enhanced our annual process and really added value.
Without question we have achieved a reduction in the time-consuming effort of control and version checks, and we have enhanced the consolidation process. But these benefits are fairly obvious and would probably be available in a myriad of possible solutions – they did not form the basis for us choosing this system.
We wanted a high-end dynamic solution that could match the complexities of our expanding business. We needed a system that fully engaged the management team: providing them with detailed analysis of performance from a variety of data sources; improving the timeliness and understanding of the impact of their decisions; giving them the opportunity to take ownership of the financials; and that would fuse the annual budget process into the operational financial management of the firm. I’d be exaggerating if I said we have achieved everything, but we are well on the way.

Amanda Loran is head of finance at Clarke Willmott. She can be contacted at amanda.loran@clarkewillmott.com.