The short answer
Define three measures separately: client-service hours as a share of available hours, billed revenue against standard recorded time value, and collections against the related invoices. Use consistent denominators and cohorts. Read the ratios alongside quality and scope; none of them alone establishes profit or future capacity.
Use three separate measures
Definitions used in this guide
| Measure | Formula | Question |
|---|---|---|
| Utilization | Client-service hours ÷ defined available hours | How much available time went to client work? |
| Billing realization | Fees billed ÷ standard recorded time value | How much time value became a bill? |
| Collection realization | Cash collected ÷ related fees billed | How much of those bills was collected? |
Some firms define utilization as billable hours divided by total paid hours; others exclude leave or certain internal work. 'Realization' can also refer to different stages. Neither convention makes a comparison valid unless the definitions, period and populations are the same. Put the formula beside the dashboard label.
A worked example
Assume a fictional employee has 160 available hours under the firm's definition and records 100 client-service hours. Utilization is 100 ÷ 160 = 62.5%. This is arithmetic, not a suggested target. Review required training, management duties and delivery quality before interpreting the result.
For a separate engagement, 20 hours at a €50 standard rate produce €1,000 of recorded time value. The firm bills €800, so billing realization is 80%. It later collects €720 against those same invoices, so collection realization is 90%. Overall cash compared with the original time value is €720 ÷ €1,000 = 72%, or 80% × 90%.
Do not mix current-month cash with current-month invoices if the cash relates to earlier periods. Link collections to the invoices being measured or use a clearly defined cohort. Otherwise an early payment can make a weak month look strong.
Treat fixed fees carefully
A fixed fee can produce billing realization over 100% against an internal standard rate. That does not automatically mean the calculation is wrong, and it is not a conventional discount measure for every engagement. A faster process may raise the ratio without changing the customer's fee.
For fixed-fee work, inspect delivery cost, contribution and scope as well. Standard recorded time value is not the same as cost. Use the client contribution calculation when the question is whether an engagement pays for its delivery.
Diagnose the combination, not one ratio
Patterns worth investigating
| Pattern | Possible cause | Next check |
|---|---|---|
| High utilization, low billing realization | Unpriced scope or write-downs | Engagement terms and time categories |
| Low utilization, strong realization | Spare capacity or leadership work | Role expectations and upcoming demand |
| Strong billing, weak collection | Late invoices or payment disputes | Invoice ageing and client follow-up |
| All ratios improve, rework rises | Incomplete time capture or rushed delivery | Quality and reopened jobs |
These are possible causes, not diagnoses. Time-recording gaps can make every ratio misleading. A manager's client-service percentage should not be judged against a preparer's without considering the work each role must perform.
Make the measures repeatable
Before reporting the ratios
Before reporting the ratios
- Publish the hour denominator and treatment of leave.
- Define included client-service or billable activities.
- Use consistent standard rates for the relevant period.
- Match bills and collections to the related engagement or invoice cohort.
- Separate fixed-fee interpretation from hourly write-downs.
- Review quality, overtime and unrecorded work alongside the ratios.
Use capacity planning for forward demand and fixed-fee pricing for package economics. Ratios describe past activity; they do not reserve the next month's reviewer hours.
Questions
There is no universal target in this guide. Set expectations by role, service and hour definition using your own data, while protecting review and training.
Yes, for example when a fixed fee exceeds recorded hours valued at a standard rate. Explain the basis rather than presenting it as cash margin.
About this article
Author: Claister
Published by Claister, the company building the accounting practice management software discussed on this website.
Design partner: Natalija Miadzelic
Editorial review: Natalija Miadzelic · Accountant · Approved
Editorial policyAccounting firm capacity, fees and profitability
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