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Kenneth Banet

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

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  1. Kenneth Banet Retired Senior Partner of Grant Thornton US Consultant to Grant Thornton China

  2. Improving Financial Performance

  3. Partnership • Principal business purposes are to: • Increase each others success • Maximize earnings “One for all; all for one”

  4. FinancialManagement • Importance of managing financial performance • Counting cash at the end of the year is not management

  5. 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?

  6. 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

  7. Financial Management • Financial Management requires basic information: • An engagement revenue budget from each partner, listing • Total revenues expected • Collections of revenue by month

  8. Financial Management • Financial Management requires basic information • Number of hours required for each engagement • By level of personnel • By month • To complete the engagement

  9. 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

  10. 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

  11. 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

  12. 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?

  13. Time Reporting • Time is money • We sell time – • Service is a result of our time

  14. 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!

  15. 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”

  16. 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 …

  17. 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

  18. Measurements - Metrics • Operating Metrics • Financial statement performance • Performance Metrics • Detail financial measurements

  19. Measurements - Metrics • Operating metrics (similar to many companies you audit) • Gross Revenues • Net Revenues • Realization Rate • Gross Margin • Operating Profit

  20. 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

  21. 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

  22. Thank you Kenneth Banet Retired Senior Partner of Grant Thornton US Consultant to Grant Thornton China

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