What Law Firm CFOs (should) do at Month-end

The month ends.
One way to play it:
  • I’m in charge of financial reporting, so I distribute the usual monthly reports:
    • income statement, balance sheet, cash flow statement; and
    • various time, billing, collections, realization, WIP and AR reports.
  • The partners (may) give the reports a perfunctory look; maybe I get a question or two, three at the most.
Meanwhile, in an alternative universe (not so far, far away):
  • Because I am in charge of financial reporting, I sport my metaphorical journalist’s cap, and I report. Atop the standard financial reports is a brief financial memo discussing the interesting, newsworthy numbers and their relationships with other data. Divided into 5 or 6 sections with text and charts, the memo follows the threads of the key performance numbers – the good, the could-be-better, and not-so-great figures and trends buried within the tsunami of data churned out from our accounting system each month.
  • Because I am in charge of financial reporting, like a journalist, I report in narrative form what the numbers are and where they might take us, as in: All the Financial News That’s Fit to Print.
Numbers have great stories to tell, but numbers cannot speak for themselves. The data needs a narrator’s voice to provide context, to separate the important figures from the chaff, and to illustrate how various numbers are interconnected. Narration brings the numbers into focus and provides clarity from an otherwise complex fog of columns and rows of data. Law firm CFOs who circulate financial reports without narrative squander a singular opportunity to communicate with the lawyers and to frame the story they are about to read. Financial storytelling, especially to an audience of lawyers, requires:
  • a concise narrative framework,
  • an informed point of view from a persuasive narrator, and
  • an understanding that the lawyers drive the data not the other way around.
Because numbers alone are seldom persuasive, heady law firm CFOs employ drama, like a John Grisham novel, to tell a story in three acts, complete with a sympathetic hero, a compelling storyline, and a mighty challenge to overcome.
  • Act I, the opening narration, introduces the protagonist (the firm), and establishes the plot:  Will the firm achieve its quest for increased profitability?
  • Act II is the messy part, where the protagonist encounters various challenges in the form of adverse data likely to impede the hero’s quest.
  • Act III is where the storyteller resolves the dramatic tension by stating, “together, we address A, B and C to solve the problems and achieve success.”

Lawyers are suckers for a great story. They are trained to construct narratives from cold sets of facts to inform and persuade judges and juries. Law Firm CFOs should use those same techniques in order to talk with lawyers in their native tongue – the persuasive narrative. 

Financial reporting done well is more than reports and spreadsheets. It requires written, spoken and non-verbal communication skills to inform, instruct, and persuade. The objective is to ensure the lawyers understand the numbers as well as you do. It is in this manner that the law firm CFO contributes to the firm’s profitability without ever recording a single billable hour.