Glossary · Receivables metrics
Realization rate
Also called Billing realization, Collection realization
Realization rate measures how much of the value of time worked a professional-services firm actually bills, and then collects.
Professional services firms — law, accounting, consulting — track realization in stages. Billing realization compares what was billed with the standard value of the hours worked. Collection realization compares what was collected with what was billed. Multiplied together, they give overall realization.
Each stage leaks money differently. Billing realization falls with write-downs, fixed fees that overrun and hours nobody records. Collection realization falls with discounts given to settle disputes, write-offs and debts that are never paid.
Collection realization is the stage collections work affects directly, and it is often the cheaper one to improve: the work is done and billed, and only the follow-up is missing.
Formula
Overall realization = (billed ÷ standard value of time worked) × (collected ÷ billed)
Example
A firm records €100,000 of time at standard rates, bills €90,000 and collects €85,500. Billing realization is 90%, collection realization 95%, and overall realization 85.5%.