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Collection rate answers one practical question: of the amount billed to a client, what percentage has been paid? It is a cash follow-through metric, not a productivity metric. A firm can log accurate billable hours and issue correct invoices while still showing a weak collection rate because the client paid late, paid partially, disputed a line item, or received a write-off.
The output matters when you review accounts receivable, client payment behavior, and invoice quality. A high rate means most billed value turned into cash. A low rate points to collection delays, billing disputes, loose payment terms, or invoices that include amounts unlikely to be paid. Keep the calculation tied to the invoice amount you expect to collect, not to raw hours worked.
The basic formula is collected amount divided by billed amount, multiplied by 100. If a project invoice includes 31 approved advisory hours at $145 per hour and 17 approved coordination hours at $110 per hour, the billed amount is $6,365. If the client has paid $5,728.50, the collection rate is 90%.
Do not mix collection rate with realization rate. Realization compares billed value with the value of billable time before discounts or write-downs. Collection compares cash received with the amount billed. If the invoice is reduced before sending, the reduced invoice amount belongs in the collection denominator. If the invoice is sent and later written off, the write-off affects how you interpret the collection result.
For U.S. billable-hour invoices, sales tax treatment is state and local. The United States has no federal VAT/GST or national sales-tax rate, so a professional-services invoice needs a jurisdiction-specific tax input only when that service is taxable. Hawaii, New Mexico, and Texas use different rules and rates for taxable business activity or taxable services.
Collection rate should compare like with like. If the billed amount includes a taxable service charge and a separate tax line, the collected amount should use the same scope. If you want to measure service-fee collection only, exclude tax from both sides. Do not treat a nonexistent federal VAT/GST as a 0% line item; it is absent from the federal system.
A one-off calculation is enough when you are checking one invoice, one client payment, or one period-end receivable figure. Enter the billed amount, enter cash received, and compare the percentage with the payment status. That gives you a clean answer for a single collection question without rebuilding the entire billing file.
A managed workflow becomes necessary when time entries, billable flags, invoice status, partial payments, and accounting exports must stay connected. Everhour Billing & Invoicing turns tracked billable time and expenses into invoices, excludes non-billable work, supports client defaults, and exports invoices to QuickBooks Online, Xero, or FreshBooks with status syncing back into Everhour.
This content is for general information only, may not be fully up to date, and is provided without any warranty or liability.
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Divide the amount collected by the amount billed, then multiply by 100. If an invoice was sent for $6,365 and the client paid $5,728.50, the calculation is $5,728.50 ÷ $6,365 × 100 = 90%. Use the same invoice scope on both sides of the formula.
Collected means cash received or a confirmed payment applied to the invoice. An invoice that has been sent, approved, or marked as payable is not collected until payment is recorded. Partial payments count only for the amount received, so a $2,000 payment on a $5,000 invoice counts as $2,000 collected.
Late payments change the rate only until the payment arrives. An unpaid invoice has 0 collected dollars for that calculation date, while a later payment increases the collected amount. For federal-agency vendor invoices, Prompt Payment rules generally use a 30-calendar-day due date after receipt of a proper invoice unless another listed term applies.
Keep disputed lines in the billed amount if the invoice was sent and the amount remains collectible. Remove them only when the invoice is formally revised, credited, or written off. This keeps the metric from hiding billing disputes by deleting unpaid value before the collection calculation is reviewed.
Use the same tax scope in both the billed amount and collected amount. The United States has no federal VAT/GST or national sales-tax rate; tax treatment is state and local. If taxable service charges appear on the invoice, include or exclude the tax line consistently rather than mixing pre-tax billed value with after-tax payments.
Everhour Billing & Invoicing converts tracked billable time and expenses into client invoices, calculates amounts from rates while excluding non-billable tasks, and supports client defaults. Invoices can be exported to QuickBooks Online, Xero, or FreshBooks, with status details syncing back to Everhour.
Everhour Reporting can show billable, non-billable, invoiced, and uninvoiced amounts alongside project and client details. Admins can export reports in CSV, Excel/XLSX, or PDF, giving finance teams a structured file for reconciling billed value with payments recorded elsewhere.
Move beyond one-off percentage checks. Everhour connects billable time, invoice creation, client settings, and accounting exports so collection review starts from organized billing records.
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