Realization rates - measure the difference between recorded time and the percentage of that time that clients pay. Implementation rates are a relatively accurate indicator of a law firm's profitability. In light of this, law firms must continue to look for ways to maximize profitability with standard billing patterns and trusted data underlying implementation rates.

Definition and calculation of the implementation rate in law firms

Overall, implementation rates are a good but rough indicator of a law firm's profitability. There are three types of implementation traditionally used in the legal industry:

1. Billing realization rate

      2. Collection realization rate

3. Overall realization rate

Billing realization rate

Billing realization rate - an indicator of the effectiveness of invoicing a client.

The billing realization rate is calculated as the sum of approved invoices made by the sum of all temporary entries multiplied by the standard rate. This is shown as a percentage.

Billing realization rate should be tracked at several levels: a) Client, b) Project, and c) Firm.

One way to analyze the level of a given implementation is to create a report showing all clients with an account implementation rate below 80% so that you can critically evaluate and investigate the reasons for the lower implementation level. If that doesn't work, try to increase implementation by using technology to automate tasks, varying team composition, applying more leverage, and so on.

Collection realization rate

Collection realization rate - an indicator of the efficiency of collecting payments for invoices issued to clients.

Collection realization rate is calculated as the number of receipts made on the amount in approved invoices. The fundraising rate is shown as a percentage.

The faster you bill and raise money, the more your sales will grow at all levels, and less partner capital will be needed to fund the firm's operations. Keep track of Work in Progress (W.I.P.) and Accounts receivable to increase collection implementation speed by speeding up billing and fees.

The faster you bill and raise money, the less partner capital you need to fund your law firm.

Overall realization rate

The Overall Realization Rate measures overall performance and the efficiency of converting work into money.

The full implementation is calculated as: the sum of the proceeds divided by the sum of all temporary project entries multiplied by the standard rate.

Let's take an example:

Lawyer Igor Vlasov "brought" 23,500 conventional units for the month on invoices issued to clients, but the cost of his billed time at the standard rate is 39,000 conventional units. Accordingly, his overall sales rate is 60%, which is traditionally considered a low indicator of overall sales.

If lawyers and staff do not record their time properly, there may be a hidden implementation problem. A practice with a very high implementation rate can be unprofitable if lawyers and staff underestimate or fail to record their time.

This often happens when work is billed at a fixed rate, and lawyers believe it is unnecessary to set the time in this case. You should be aware that in such cases, you will receive distorted statistics when comparing implementation rates by type of service, client, or project.

Some consultants advise their clients not to keep track of time if they are doing fixed-pay work. However, not tracking time robs you of vital implementation data that can be key to your firm's profitability optimization efforts. Your time attendance and billing system are central in costing, pricing, and helping you estimate hourly or flat rates. This helps to ensure that the desired net profit is achieved.