Professional services
Law Practice Collection Rate Calculator
Measures collection, which is where billed work stops being revenue.
Result
Business arithmetic for running a practice, not legal advice. Fee agreements, contingency limits, trust accounting and advertising are all governed by the rules of professional conduct where you practise, and several are strict. Check the applicable rules before any of this affects a client agreement or a marketing decision. Billing delay is usually the larger and more fixable half of the cycle. An invoice sent five weeks after the work competes with a client's fresher obligations and a fading memory of the value. Trust accounting rules govern how retainers are held and applied and are strictly enforced.
Get a Free Business AuditHow the calculation works
Amounts collected divided by amounts billed, with the shortfall valued. Collection sits after realisation in the chain: hours recorded, hours billed, amounts collected. A practice with a good realisation rate and poor collection has done the work and sent the bill and simply not been paid, which is a different problem from writing time down.
What moves the number
- Whether fees are secured by a retainer held in trust.
- Billing frequency, since old bills collect worse.
- Practice area, as some client types pay far better than others.
- Whether the engagement letter set terms the client understood.
Where this one goes wrong
An unearned retainer held in client trust and applied against bills as fees are earned is the strongest protection available, and the conduct rules in every state require that money to be held separately from the firm's own funds rather than treated as income on receipt. Mixing the two is a serious violation regardless of intent. Beyond that, billing promptly and in small increments collects better than large bills sent late, because the client's recollection of the value fades faster than the balance does.
Before you quote
- Hold unearned fees in client trust, separate from firm funds.
- Bill promptly and regularly rather than in large late bills.
- Set payment terms in the engagement letter, in writing.
Where the rules come from
Questions
About this calculator
How do I improve collection in a law practice?
Secure fees with an unearned retainer held in trust and applied as work is done, and bill promptly in regular increments. A large bill sent late collects worse than the same amount billed monthly, because the client's sense of the value fades faster than the balance.
Can I treat a retainer as revenue when received?
Not while it is unearned. Client funds must be held separately from the firm's own money under the conduct rules every state has adopted, and applied against fees as they are earned. Mixing the two is a serious violation irrespective of intent.
Is collection the same as realisation?
No. Realisation measures what was billed against what was recorded; collection measures what was paid against what was billed. A practice can have good realisation and poor collection, which means it did the work, billed it properly and was not paid. The fixes are different.
The formula
collection rate = collected / billed; cycle = days to invoice + days to payment
Put this calculator on your site
Free to embed. Paste this where you want it to appear. It stays up to date automatically because it loads from BDEVY.
Please keep the attribution line. It is the only thing we ask in return.
How to use this calculator
- Billed per month ($). Enter your own figure; the page starts at $32,000.
- Collected per month ($). Enter your own figure; the page starts at $27,500.
- Outstanding receivables ($). Enter your own figure; the page starts at $74,000.
- Days between work and invoice. Enter your own figure; the page starts at 34.
- Days from invoice to payment. Enter your own figure; the page starts at 41.
- Share of work covered by retainers (%). Enter your own figure; the page starts at 20%.
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 |
|---|---|
| Billed per month | $32,000 |
| Collected per month | $27,500 |
| Outstanding receivables | $74,000 |
| Days between work and invoice | 34 |
| Days from invoice to payment | 41 |
| Share of work covered by retainers | 20% |
What comes out
| Result | Value |
|---|---|
| Collection rate main result | 85.94% |
| Days from work to cash | 75 |
| Cash tied up | $74,000 |
| Uncollected per month | $4,500 |
| Recovered by moving to retainers | $10,800 |
Collection rate is 85.94%, leaving $4,500 a month uncollected. The full cycle from doing the work to being paid is 75 days, and the billing delay is the half you control entirely.
How sensitive the answer is
Holding everything else steady and changing only billed per month, this is what happens to collection rate. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Billed per month ($) | Collection rate |
|---|---|
| $16,000 | 171.88% |
| $24,000 | 114.58% |
| $32,000 example above | 85.94% |
| $48,000 | 57.29% |
| $64,000 | 42.97% |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Billed per month ($)
- A money amount, starting at $32,000.
- Collected per month ($)
- A money amount, starting at $27,500.
- Outstanding receivables ($)
- A money amount, starting at $74,000.
- Days between work and invoice
- A number, between 0 and 180, starting at 34.
- Days from invoice to payment
- A number, between 0 and 365, starting at 41.
- Share of work covered by retainers (%)
- A percentage, between 0 and 100, starting at 20%.
What the results tell you
| Result | What it is |
|---|---|
| Collection rate | The headline result. A percentage. |
| Days from work to cash | A number. |
| Cash tied up | A money figure. |
| Uncollected per month | A money figure. |
| Recovered by moving to retainers | A money figure. |
Keep going
Related calculators
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.