Every law firm tracks billable hours. Most track revenue. But surprisingly few track the metric that connects the two and reveals how much money is slipping through the cracks: realization rate. If you're not measuring this number, you're almost certainly leaving tens of thousands of dollars on the table every year — and you might not even know it.
What Is Realization Rate?
Realization rate measures the percentage of billable work that actually converts to collected revenue. It's typically expressed in two stages:
- Billing realization: The percentage of worked hours that make it onto an invoice (before write-downs and discounts)
- Collection realization: The percentage of invoiced amounts that are actually collected
Your overall realization rate is the product of these two. If you bill 90% of your worked hours and collect 92% of what you bill, your overall realization rate is 82.8%. That means for every dollar of work your attorneys perform, you're collecting about 83 cents.
The industry average hovers around 85%, but we've seen firms as low as 70% — meaning nearly a third of all work performed never turns into cash. For a firm billing $2 million in annual hours, the difference between 85% and 92% realization is $140,000 in recovered revenue. That's real money, and it's recoverable.
The Four Revenue Leaks
Leak #1: Poor Time Capture
The biggest source of lost revenue happens before a bill is even generated. Attorneys who enter time days or weeks after performing the work consistently underreport their hours. Studies show that same-day time entry captures 25-40% more billable time than weekly batch entry. If your attorneys are "catching up on time" every Friday, they're forgetting work they did on Monday and Tuesday.
The fix: Implement a same-day time entry policy. Use tools like Clio or TimeSolv that make mobile time entry easy. Set a firm-wide standard: time entries must be submitted by end of day, every day. No exceptions.
Leak #2: Excessive Write-Downs
Write-downs happen when a billing attorney reviews pre-bills and reduces the hours or rates before sending the invoice. Some write-downs are legitimate — a junior associate took longer than the work should have required, or the work scope was miscommunicated. But chronic, across-the-board write-downs usually signal a pricing problem, not a performance problem.
The fix: Track write-downs by attorney, by client, and by matter type. Look for patterns. If one partner consistently writes down 20% of their team's time on a specific client, that's a scope or pricing conversation waiting to happen. If associates are consistently over-budget on certain task types, that's a training opportunity.
Leak #3: Billing Delays
The longer you wait to send an invoice, the less likely you are to collect the full amount. Invoices sent within 30 days of work performed have a collection rate 15-20% higher than invoices sent at 60+ days. Yet many firms don't send invoices until 45-60 days after the work is done, because pre-bill review and approval processes are slow and manual.
The fix: Streamline your billing workflow. Set a hard deadline: all pre-bills reviewed and invoices sent within 15 days of month-end. Automate pre-bill distribution to billing attorneys. Use electronic approval workflows instead of printing paper pre-bills for review.
Leak #4: Weak Collections
An invoice sent is not revenue earned. Collections require systematic follow-up, and most firms don't have a formal collections process. Overdue invoices sit in aging reports that no one reviews, and by the time someone follows up at 90 days, the client has moved on mentally and the leverage for collection has diminished significantly.
The fix: Implement an automated collections cadence. Send a friendly reminder at 15 days past due. Follow up at 30 days with a phone call. Escalate at 45 days to the responsible partner. At 60 days, trigger a formal collections process. The key is consistency — every invoice, every time, no exceptions.
A Step-by-Step Plan to Push Above 92%
Based on our work with law firm clients, here's a practical roadmap to improve your realization rate over the next 90 days:
Month 1: Measure and Baseline
- Calculate your current billing realization and collection realization rates using the last 12 months of data
- Break down realization by attorney, practice area, and top 10 clients
- Identify the two or three biggest sources of leakage
Month 2: Fix Time Capture and Billing
- Implement same-day time entry policy with accountability measures
- Reduce pre-bill review cycle to 10 business days
- Set up write-down tracking and monthly review
Month 3: Fix Collections
- Implement automated payment reminders at 15, 30, and 45 days
- Assign collections responsibility to a specific person (not the billing attorney)
- Review AR aging weekly in a standing 15-minute meeting
The Compound Effect
Improving realization rate isn't about any single dramatic change — it's about dozens of small improvements that compound. Capture 10% more time through same-day entry. Reduce write-downs by 5% through better scoping. Speed up billing by two weeks. Improve collections by 3% through consistent follow-up. Each improvement seems modest on its own, but together they can move your realization rate from 85% to 92% — and that 7-point improvement translates directly to your bottom line.
At CleanBooks, we help law firms identify their specific realization gaps and build the systems to close them. If you suspect your firm is leaving revenue on the table, we'd be happy to run a complimentary realization analysis on your last 12 months of billing data.