All of us have peeked inside the cockpit of big, modern, commercial
aircraft and, if you’re at all like me, you see every available square
inch covered with dials, knobs, toggle-switches, and warning lights,
and you wonder how on earth the pilot keeps track of it all.
The answer is, if he’s good, he doesn’t. The three big things
that matter are airspeed, altitude, and the artificial horizon. Everything
else is programmed to "speak up" if it needs attention.
Now analogize this to your financials. You don’t really need
to view realization rates on paralegal billings office by office
every month (although this information is surely available today). What
you need to keep an eye on is trend-line growth of revenue vs. expenses. These
in turn are driven by only a very few variables: Billable hours,
hourly rates, realization/write-down rate, number of fee earners and
fixed overhead.
Sit down with your CFO and this
article, if you haven’t already had
this conversation.
