Everhour connects tracked billable time to invoices, but realization rate still depends on the fees you actually bill.
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Realization rate answers a narrow but important question: out of the billable work recorded at standard rates, how much did you actually bill to the client? It is not a productivity score and it is not a cash collection score. It shows the effect of discounts, write-downs, capped fees, excluded tasks, and invoice edits on the value of recorded billable time.
For a service business, this number explains why a team can stay busy and still miss revenue expectations. If standard billable value is $10,000 and the invoice goes out for $8,700, the realization rate is 87%. The missing 13% usually comes from pricing decisions, client adjustments, internal review, or time entries that were approved but not billed.
The basic formula is: realization rate = billed fees ÷ standard value of billable time × 100. Standard value means the approved billable hours multiplied by the agreed rates before write-downs, discounts, taxes, expenses, or collection issues. Billed fees means the amount actually placed on the client invoice for that time.
For example, a client strategy project includes 15 approved senior hours at $250 per hour and 30 approved analyst hours at $125 per hour. The standard value is $7,500. After a $750 write-down, the invoice includes $6,750 in billed fees. The realization rate is $6,750 ÷ $7,500 × 100 = 90%.
Do not blend utilization, realization, collection, and effective billing rate into one number. Utilization compares billable hours with total worked hours. Realization compares billed fees with standard billable value. Collection compares cash received with invoiced fees. Effective billing rate divides revenue by hours, which is useful but answers a different pricing question.
This separation matters when diagnosing the problem. A 90% realization rate with a 100% collection rate points to write-downs or discounts, not unpaid invoices. A 100% realization rate with an 80% collection rate points to payment follow-up. In the United States, there is no federal VAT/GST or national sales-tax rate for billed professional time; tax treatment is state and local, so keep tax inputs outside the realization percentage.
A one-off calculation is enough when you need to review one invoice, test a proposed write-down, or explain why a matter billed below standard value. Use approved billable hours, the correct rate for each person or task, and the final billed fee for the same work period. Do not mix collected cash into this calculation.
A managed workflow is better when realization rate is reviewed every month, by client, project, role, or matter. Continuous time capture, billable and non-billable flags, approval, invoice generation, and billing status reduce manual reconciliation. Everhour supports that path by turning tracked billable time and expenses into invoices while excluding non-billable work from invoice totals.
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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Realization rate = billed fees ÷ standard value of billable time × 100. Standard value is the approved billable time multiplied by the applicable rates before write-downs or discounts. Billed fees are the time-based fees actually included on the invoice. A $9,200 invoice from $10,000 of standard billable value has a 92% realization rate.
Include approved billable hours priced at the rates that apply to the work: person rates, task rates, project rates, or matter rates. Exclude non-billable time, taxes, reimbursable expenses, and collected payments. If a client contract sets a special rate, use that agreed rate as the standard for the calculation.
Yes. A write-down reduces the billed fee while the original standard value remains visible, so the realization rate falls. If $4,000 of approved billable time is reduced to a $3,400 invoice line, realization is 85%. This is the point of the metric: it shows how much recorded billable value survived billing review.
No. Realization rate measures billed fees against standard billable value. Collection rate measures cash received against invoiced fees. A client can receive an invoice at full value, giving you 100% realization, and still pay late or partially, producing a lower collection rate.
No. Keep taxes and reimbursable expenses outside the realization-rate numerator and denominator unless your internal policy defines a separate blended metric. In the United States, there is no federal VAT/GST or single national sales-tax rate for billed professional time, and state or local tax treatment belongs on the invoice, not inside the realization calculation.
Everhour Billing & Invoicing converts tracked billable time and expenses into invoices, calculates invoice amounts from rates, and excludes non-billable tasks. Invoices can be exported to QuickBooks Online, Xero, or FreshBooks, with invoice status syncing back to Everhour.
Everhour Reporting lets admins build reports with billable time, non-billable time, billable amount, cost, project, member, task, and invoice status columns. Those fields give you the source values needed to compare standard billable value, billed fees, and uninvoiced work.
Use approved hours, rates, and billable flags as the source of invoice totals. Everhour converts tracked billable time and expenses into invoices while excluding non-billable work from client charges.
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