Using business intelligence to improve operations

Many firms are turning to business intelligence (BI) tools, such as business planning and profitability applications, to improve operations. These tools help firms establish financial targets for revenue growth, cost control and, most importantly, profitability. The most successful firms view business planning and profitability analysis as an ongoing process, something done continually rather than only once or twice a year. And the economic downturn has only increased the importance of BI tools; now more than ever, firm leaders need to better understand their businesses and have access to accurate information on which to make more informed decisions to improve their operations.

Improving business planning

Although universally dreaded, developing an annual business plan and budget is an increasingly important process for firms because of growing competition, rising costs and shrinking profits.

Clayton Utz, one of Australia’s largest law firms (CU), historically developed its budget using spreadsheets; their finance department juggled dozens of spreadsheets to gather budget information, a process involving up to 60 people, including partners, practice-group leaders and finance team members. Also, large amounts of data were entered manually, often resulting in duplicate information or errors. This process made it very difficult for CU to develop accurate budgets and reports in a timely manner, track changes between budget version and audit individual inputs. Also, the firm found its business-planning process was time consuming, typically taking up to nine weeks to complete. Given the complexity of their business requirements and need for strong revision management throughout the business-planning process, CU came to the conclusion that there had to be a better way.

Cutting the planning cycle in half

When CU searched for a business-planning solution, their objectives were simple: minimise the impact the process had on its partners and finance team, and reduce the overall (and non-billable) time it took them. It selected a business-planning application that worked seamlessly with its practice management system. During the firm’s annual budgeting cycle, the application’s collaborative environment, instant revision consolidation and ability to easily compare different versions helped CU cut its business plan development cycle almost in half – from nine weeks to just five weeks. The firm also noted a beneficial side-effect: their financial analysts could spend more time analysing their budget and adding value to the process rather than simply consolidating spreadsheets.

Analysing performance to maximise profitability

Another key aspect of BI is analysing firm performance once a business plan has been established.

Understanding how its various operations are performing has always been a priority for Miller, Canfield, Paddock and Stone, PLC (MC), an international law firm with more than 260 attorneys. For nearly two decades, the firm had analysed the performance of its 15 practice groups to maximise profitability. Unfortunately, this was such a complex and time-consuming process that the firm was only able to do it twice a year, and only at the level of practice groups.

MC knew it needed to improve how it analysed its profitability, so it could gain better control over its operations and improve its business performance. The firm wanted to centralise its profitability analysis and remove the burden of doing so from each practice group. MC also wanted to apply standardised business rules to the process, making it easily repeatable. Finally, it wanted to improve its profitability reporting, shrinking the time from fiscal-period close to the delivery of actionable information to its partners and lawyers.

To accomplish these goals, MC implemented a profitability analysis application that allowed the firm to accurately allocate expenses and create an exceptionally detailed picture of its profitability. It used granular data from its business planning and budgeting application to populate its profitability model.

MC was able to quickly and accurately allocate firm expenses, such as secretarial assignments, marketing, and firm and office overheads. To improve the quality of its analysis, the firm used absolutely no enterprise-wide expense allocations, only regional allocations. The result was an exceptionally detailed picture of its profitability.

Accessing detailed and timely profitability information

Whereas previously MC was only able to track the profitability of its various practice groups, its use of technology enabled it to analyse its profitability down to the most detailed level of timekeeper and matter. This allowed MC to truly understand its operations, make informed decisions on how to optimise performance and perform profitability analysis on a much more frequent basis, from twice a year to once a month.

Used properly, BI tools can help firms to dramatically improve their operations and their bottom lines. Investing in these tools, especially business planning and profitability analysis applications has become an effective way for firms to cope with these challenging times.

David Thorpe is general manager, EMEA at ADERANT and can be contacted at david.thorpe@aderant.com