Financial Directors are the CPUs of business
The analogy that Yvonne Thomas, Financial Director of Barcan+Kirby LLP, uses to describe Financial Directors is an intriguing one; she believes that FDs are essentially carrying out the work in a business in the same way that a central processing unit (CPU) works for a computer.
The CPU is an important part of every computer, sending signals to control other parts of the machine. Thomas links the fact that the CPU sorts and utilises all of the information it receives, to the way that FDs work by using data collected from across the organisation.
“FDs take all of the data from the internal systems and the current and future requirements of different areas of the business and combine this with information relating to developments in the legal market and the economy. They process and analyse all of these factors and consequently come up with the best strategy for the future financial health of the firm,” she says.
Without taking into account all of these different data sources, Thomas believes FDs are not able to make informed decisions.
“You need to know everything that’s happening in the firm –for example from the HR perspective, you need to know how difficult it is to recruit for different roles, to be aware of any developments in employment law and if any of these have the potential to affect the business and the impact they would have,” she says.
In marketing, in addition to information relating to the traditional analysis of the correlation between spend and results, they also need to consider the added value of less easy to measure benefits such as ‘brand’ ‘reputation’ and ‘shared values’.
In addition, the FD has to be confident that the IT function is efficient on a day to day basis thus maximising fee earners output and to understand the cost/benefit of new Legal Tech products in order to enable decisions to be made on future investment in Technology which enhance the Firm’s strategy and increase its potential future profit.
Gaining access to data is often a barrier for Partners and fee-earners as it is often not available in an easy-to-digest format, or it is not insightful enough. However, Thomas believes it is imperative that everyone has access to the data they need to perform their role efficiently.
“Previously, I went through the data myself preparing lots of spreadsheets and pivot tables. From these I produced a monthly summary of relevant headline figures accompanied by a short explanation which I sent to the partners, thereby making sure they weren’t overwhelmed by the amount of information and therefore much more likely to read it,” she says.
“Now we’ve got Katchr, which brings all of the data together in a format which is easy to read for everyone. It’s much easier as everyone has access to dashboards and relevant information straightaway. The dashboard utilises all of our data and you can see the overall position at a glance, or you can drill down further if there’s a particular area you want to look at. This has enabled the firm to push responsibility for financial health down to department heads and team leaders” she says.
Cleaner and easier-to-read reports can also be pulled from the data by everyone. It is easy to tailor the level of detail accessed by individuals to their position within the firm and their needs. Thomas says that firms have to be careful that they don’t over-analyse the data, or indeed rely only on their own data without take into account external factors.
“I’ve always looked at the big picture because you can look at your numbers and think everything looks good but there may be something different at play which you have to consider,” she says.
This could include such things as people leaving the firm, a new development in the market, or a few new firms moving to your area that will take some clients away from the business.
“You can’t just put together a strategy for two years and just use this document, you have to be flexible and continually reassess and amend as things move and change all the time,” she states.
This includes looking at real-time data; although Thomas cautions that it is still the period end or year end data that is critical as you need points in time to be able to measure performance.
“There has to be a set period to enable you to perform comparisons, and you must be able to match expenditure and income. Although you are aware of data and happenings in real-time, reporting is different,” she says.
The dilemma with CRM
Thomas says that a lot of firms use customer relationship management (CRM) products, but that surveys show that around 90% of these systems are not particularly effective.
“The reason why CRM is an issue is nothing to do with the software. The software is good – it’s usually the users who are at fault. CRM only works well if you accurately input and continually update the information that make it useful. Consequently, you have to find ways around the fact that it isn’t as effective as it should be and look at how your firm can differentiate itself from other firms, using all of the data from disparate sources, bringing everything together and coming up with a solution,” she says.
Perhaps in the years to come artificial intelligence and automation could play a part in making these CRM systems more effective – but Thomas warns that machine learning relies on learning from the past.
“If you can’t get the information right and complete, then you’re relying on detail that isn’t accurate and so the machine isn’t learning properly,” she says.
Strategic input with clients
“A lot of FDs think the strategic advisor role is new – I’m not convinced about that, as looking at all operations and not finance alone is something I’ve always felt necessary to perform the Finance role effectively,” says Thomas.
But she also believes that firms could extend their use of FDs externally. “
Firms could use the expertise of an FD more when they’re talking to clients as well, because FDs can help with finding widespread solutions for the client’s legal needs, not just the individual traditional legal advice they’ve originally requested,” Thomas suggests.
She suggests law firms could use the expertise of the FD to replicate the way accountancy firms use a walkthrough test to get an idea of every process in a client’s business. They can use this appreciation of the client’s needs to look at the overall legal requirements within the business and introduce relevant lawyers to help clients in each area they require support.
Key takeaways from Thomas
1. The FD is the central processing unit of a business
Collecting information from the departments, the I.T. systems and the legal market and processing it to produce a strategy and to continuously monitor performance enables the FD to become as integral to a business as a CPU is to a computer.
2. CRM suffers from a user perspective
CRM is a huge part of data strategies, but firms are being let down by the users of the systems rather than the software, rendering them less effective for law firms.
3. An FD can help support clients, as well as the business
Law firms should tap into the expertise of the FD to help clients with their own strategies; this advice could help foster a better working relationship with clients, resulting in more financial success.