Blog · Wallet share and penetration · Consulting and advisory
The honest answer to what realization rate a law, accounting or consulting firm should have: the 85 to 95 percent figures quoted depend on which realization is meant, billing realization against recorded time or collection realization against billed, on the rate card the time was valued at, and on the client and matter mix. This page gives the ranges by firm type, the three measurable things that set the right figure for one firm, and the table to compute before anyone quotes a percentage.
Realization is what the firm gets over what it recorded, and there are two of them. This page sets them out, gives the ranges, and shows the three things that make one firm's figure mean something.
| Measure | Formula | Law, typical | Accounting, typical | Consulting, typical |
|---|---|---|---|---|
| Billing realization | Fees billed ÷ time at standard rates | 82 to 92 percent | 80 to 90 percent | 75 to 90 percent |
| Collection realization | Cash collected ÷ fees billed | 92 to 97 percent | 93 to 98 percent | 90 to 97 percent |
| Net realization | Product of the two | 76 to 89 percent | 75 to 88 percent | 68 to 87 percent |
Consulting runs lower on billing realization because more work is fixed-fee against time budgets that overrun.
| Stage | Amount | Rate vs prior stage |
|---|---|---|
| Time recorded at standard | $10,000,000 | |
| Fees billed | $8,800,000 | 88% billing realization |
| Cash collected | $8,360,000 | 95% collection realization |
| Net | 83.6% |
The firm quoting 95 is quoting collection. The firm quoting 88 is quoting billing. The partners feel 83.6.
| Year | Standard rate | Hours | Time at standard | Billed | Realization |
|---|---|---|---|---|---|
| Last | $500 | 20,000 | $10,000,000 | $8,800,000 | 88% |
| This | $550 | 20,000 | $11,000,000 | $8,900,000 | 81% |
Billed rose one percent. Realization fell seven points. The clients on agreed rates paid what they agreed; the rate card moved. At last year's card, this year's realization is 89 percent, and the finding is that the rate rise was realized on almost nobody. Realized rate per hour, $440 to $445, is the figure that survives the card change.
| Client | Realization, this year | Prior year | Three years ago | Write-offs this year | Decided? |
|---|---|---|---|---|---|
| A | 70% | 71% | 70% | $0 | Negotiated discount, on file |
| B | 74% | 85% | 92% | $180,000 | Nothing on file |
| C | 102% | 100% | 98% | $0 | Premium agreed |
B is the row. The realization by client piece works the list, and the utilization against realization piece does the same per fee earner.
| Measure | Formula | From |
|---|---|---|
| Billing realization | Billed ÷ time at standard, per client, matter, fee earner | Time and billing system |
| Collection realization | Collected ÷ billed, per client | Billing and cash |
| Net realization | Product | Above |
| Realized rate per hour | Billed ÷ hours | Time and billing |
| Same at prior rate card | Billed ÷ time at prior standard | Time, prior rates |
| Write-offs per client with a reason | Time recorded − time billed, by matter, with the write-off code | Billing system |
| Identity | Time at standard = billed + written off + written down + WIP still open | Time and billing |
Which realization, unstated. Ninety-five reported; eighty-four received.
Rate rise read as realization fall. Partners told to bill harder for a card change.
Firm average only. B's twenty-point slide inside an 88.
Write-offs without reasons. A discount that grew matter by matter and was never decided.
A good realization rate is both realizations, computed at a fixed rate card, per client against the client's own history, with every write-off carrying a reason. Net realization of 80 to 88 percent is normal range for most firms; the per-client trend and the realized rate per hour are what tell a firm whether its rate rises reached anyone. Covirage computes all of it from the time, billing and cash exports every month with the identity checked.
Both, and the product. Billing realization is what partners give away before the bill goes out; collection realization is what clients refuse or delay after. A firm at 90 and 95 realizes 85.5 cents of every standard-rate dollar recorded. Each has a different owner: the first is the billing partner, the second is credit control and the engagement terms.
Because realization is measured against standard rates and the standard rates went up. If clients on fixed fees or agreed discounts paid the same, realization fell by exactly the rate increase. Measure at a fixed rate card across periods, or measure realized rate per hour in currency, and the fall disappears. A rate rise that is not realized is a finding; a rate rise that is masquerading as a realization fall is not.
One that fell against its own history without a decision. A client at 70 percent that has been at 70 for five years has a negotiated discount; a client that was at 92 and is at 74 has had time written off matter by matter until the discount grew. The client-level trend, with the write-offs listed, is the table.