Law firm seeks to validate budgeted partner revenue

Our client’s need

A successful regional law firm was experiencing little attorney attrition over the past two decades which made budgeting annual revenue a straightforward calculation of multiplying hours, billing rates and realization.

As a result of the recent economic downturn, the client experienced a dramatic decline in profits-per-partner which triggered an unprecedented migration of attorneys between firms. The attorneys leaving the law firm coupled with the influx of new laterals to fill vacancies, made budgeting monthly and annual revenue much more complex, creating an uncertainty about the reliability of future results.

Baker Tilly solution

Baker Tilly’s professional services personnel were entrusted with developing an alternative method of budgeting revenue to validate the client’s internal calculations.

• Baker Tilly noted that monthly billings were a consistent metric from year to year.
• Baker Tilly used collections data from the prior three years to determine the percentage received in each subsequent month.
• Baker Tilly applied these historical collection percentages against expected monthly billings. The results validated internal calculations which increased management’s confidence in future budgeted revenue projections.
• The Baker Tilly approach was proven reliable based upon the client’s consistent billing history, expected seasonality and level of monthly billings from month to month.

Results

The law firm validated the reliability of their traditional budget to meet the expectations of the partnership. The confidence gained by the law firm related to their financial projections allowed management to concentrate their attention on strategic decisions and to more quickly proceed with implementing initiatives to increase profitability. Baker Tilly’s extensive law firm experience provided our client with a creative solution and turned a challenge into positive results.

For more information on this topic, or to learn how Baker Tilly professional services specialists can help, contact our team.