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Kenneth Banet. Retired Senior Partner of Grant Thornton US Consultant to Grant Thornton China. Improving Financial Performance. Partnership. Principal business purposes are to: I ncrease each others success Maximize earnings “One for all; all for one”. Financial Management.

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kenneth banet

Kenneth Banet

Retired Senior Partner of Grant Thornton US

Consultant to Grant Thornton China

  • Principal business purposes are to:
    • Increase each others success
    • Maximize earnings

“One for all; all for one”

financial management
  • Importance of managing financial performance
  • Counting cash at the end of the year is not management
financial management1
Financial Management
  • Do you know what each engagement really costs your firm?
  • Do you know whether each engagement is profitable – or how profitable?
  • Do your partners know what financial performance objectives are expected of them?
financial management2
Financial Management
  • Some basics are required
    • A budget from each partner
    • A consolidated budget for each department/ office and the firm
    • Reporting of actual hours devoted to each client by all personnel
    • Rate per hour for all personnel
financial management3
Financial Management
  • Financial Management requires basic information:
    • An engagement revenue budget from each partner, listing
        • Total revenues expected
        • Collections of revenue by month
financial management4
Financial Management
  • Financial Management requires basic information
    • Number of hours required for each engagement
          • By level of personnel
          • By month
          • To complete the engagement
the budget a plan or a wish
The Budget – a “Plan” or a “Wish”
  • Can you recognize where changes are necessary?
    • Net revenues
    • Salaries and number of personnel
    • Operating expenses
    • Number of charged hours to clients
    • Average rate per hour to be charged to clients
    • Average realization rate of fees
a budget is
A Budget IS
  • A TOOL
    • to create a financial strategy
    • to manage the financial strategy
    • to establish partner objectives
    • to identify variances
    • to correct variances - timely
the firm plan
The Firm Plan
  • Starts with the Partners’ Plans
    • Expected revenues for each client
    • Expected hours by staff level to complete engagement
    • Expected cost of engagement, including potential profit
the firm plan1
The Firm Plan
  • Do the Partners’ plans agree with the Firm plan?
    • Do net revenues meet your expectations?
    • Do you have an adequate number of personnel each month?
    • Do net revenues produce adequate profit?
    • Are some engagements “loss” engagements?
    • Are all Partners profitable – adequately profitable?
    • Do their plans justify their compensation expectations?
time reporting
Time Reporting
  • Time is money
  • We sell time –
    • Service is a result of our time
time reporting myths
Time Reporting Myths
  • We always correctly estimate how many hours it will take to complete an engagement!
  • All client engagements proceed exactly as planned!
  • Client financial records are always orderly and complete!
  • We can always easily obtain the documentation requested!
time reporting1
Time Reporting
  • Therefore, the need for everyone to keep track of the time devoted to each engagement
  • Daily or weekly time reporting requirement
  • “Time is money” - “Service is the result of our time”
what is a charge rate
What is a Charge Rate?
  • Converts time to money
    • Charge rate per hour - composed of
      • Cost of average salaries by level, plus
      • Cost of operating expenses, plus
      • Potential profit percent
  • Often regarded as the “Rule of Thirds”
    • But …
analyzing variances
Analyzing Variances
  • Keeping financial performance “on track”
    • Periodic financial statements
    • Analysis of key data
    • Comparison of data to the budget
    • Determine reasons for variations
    • Timely corrective actions
measurements metrics
Measurements - Metrics
  • Operating Metrics
    • Financial statement performance
  • Performance Metrics
    • Detail financial measurements
measurements metrics1
Measurements - Metrics
  • Operating metrics (similar to many companies you audit)
    • Gross Revenues
    • Net Revenues
    • Realization Rate
    • Gross Margin
    • Operating Profit
measurements metrics2
Measurements - Metrics
  • Performance Metrics
    • Net rate per hour
    • Number of charge hours
    • Net revenues per partner
    • Gross margin per professional
    • Utilization rate
    • Number of charge hours per professional
measurements metrics3
Measurements - Metrics
  • What they tell you
    • Where are you compared to budget and compared to last year?
    • Where is corrective action necessary?
    • Which engagements are profitable – more profitable?
    • Which partners are profitable – more profitable?
    • Do we have enough or too many staff?
    • What goals do I need to set for my partners?
      • And much, much more
kenneth banet1

Thank you

Kenneth Banet

Retired Senior Partner of Grant Thornton US

Consultant to Grant Thornton China