Professional services
Law Firm Collection Rate Calculator
Measures firm collection, where the aged balances tell you what is really recoverable.
Result
Business arithmetic for running a practice, not legal advice. Fee agreements, contingency limits, trust accounting and fee splitting are governed by the rules of professional conduct in your jurisdiction, and several of them are strict. Check the applicable rules before any of this affects a client agreement. Late invoicing causes more late payment than unwilling clients do. Trust accounting rules are strict about how retainers are held and applied, and evergreen retainers, which replenish as they are drawn down, are the most reliable structure where the rules and the client permit them.
Get a Free Business AuditHow the calculation works
Amounts collected divided by amounts billed, with the shortfall valued. Across a firm the number worth watching alongside it is the ageing profile, because collection probability falls sharply with age and a balance past a certain point is effectively a write-off that has not been recognised yet.
What moves the number
- Ageing profile of receivables.
- Client type, since payment behaviour differs sharply.
- Whether retainers secure the fees.
- Billing frequency and promptness.
Where this one goes wrong
Old receivables carried at face value overstate the firm's position, and a firm counting them as assets is reporting revenue it will not receive. Age the balances and act while they are young, because the conversation at thirty days is routine and at a year it is a dispute. Unearned retainers held in client trust and applied as fees are earned largely remove the problem, and the conduct rules require that money to be held separately from firm funds in any event.
Before you quote
- Age receivables and act on them early.
- Hold unearned retainers in client trust.
- Write off genuinely uncollectable balances rather than carrying them.
Where the rules come from
Questions
About this calculator
When does a receivable become uncollectable?
Probability falls sharply with age, and a balance past a certain point is effectively written off whether or not the firm has recognised it. Carrying old receivables at face value overstates the firm's position and delays the collection work that would have worked.
What is the best time to chase a bill?
Early. The conversation at thirty days is routine and the same conversation at a year is a dispute, with the client's recollection of the value long faded. Firms that age their receivables and act promptly collect substantially more.
Do retainers solve collection?
Largely, where the practice area allows them, because the fee is secured before the work. The funds must be held in client trust separate from firm money and applied only as fees are earned, which the conduct rules require independently.
The formula
collection rate = collected / invoiced; days outstanding = receivables / daily invoicing
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How to use this calculator
- Invoiced in the period ($). Enter your own figure; the page starts at $420,000.
- Collected in the period ($). Enter your own figure; the page starts at $372,000.
- Outstanding receivables ($). Enter your own figure; the page starts at $118,000.
- Average days to payment. Enter your own figure; the page starts at 62.
- Written off as uncollectable ($). Enter your own figure; the page starts at $14,000.
The result updates as you type, so you can try a figure, see what it does to collection rate, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Invoiced in the period | $420,000 |
| Collected in the period | $372,000 |
| Outstanding receivables | $118,000 |
| Average days to payment | 62 |
| Written off as uncollectable | $14,000 |
What comes out
| Result | Value |
|---|---|
| Collection rate main result | 88.57% |
| Days of revenue outstanding | 8.4 |
| Write-off rate | 3.33% |
| Lost to write-offs per month | $14,000 |
| Cash tied up in receivables | $118,000 |
Collection rate is 88.57% with 8.4 days of revenue outstanding. Write-offs run 3.33%, which is $14,000 of work done and never paid for.
How sensitive the answer is
Holding everything else steady and changing only invoiced in the period, this is what happens to collection rate. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Invoiced in the period ($) | Collection rate |
|---|---|
| $210,000 | 177.14% |
| $315,000 | 118.10% |
| $420,000 example above | 88.57% |
| $630,000 | 59.05% |
| $840,000 | 44.29% |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Invoiced in the period ($)
- A money amount, starting at $420,000.
- Collected in the period ($)
- A money amount, starting at $372,000.
- Outstanding receivables ($)
- A money amount, starting at $118,000.
- Average days to payment
- A number, between 0 and 365, starting at 62.
- Written off as uncollectable ($)
- A money amount, starting at $14,000.
What the results tell you
| Result | What it is |
|---|---|
| Collection rate | The headline result. A percentage. |
| Days of revenue outstanding | A decimal figure. |
| Write-off rate | A percentage. |
| Lost to write-offs per month | A money figure. |
| Cash tied up in receivables | A money figure. |
Keep going
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