Understanding Your Numbers: A Financial Guide for Law Firms

Realisation Rate: The Gap Between Recorded and Collected

Realisation rate is the percentage of recorded billable time that actually gets invoiced and collected, after write-offs and discounts. A firm can have impressive recorded hours and still have a low realisation rate if significant time is written off or discounted before billing, meaning the real economic value of the work is much lower than the timesheet suggests.

Matter Profitability, Not Just Matter Revenue

Comparing fees actually collected on a matter against the cost of time and disbursements involved, including a reasonable allocation of overhead, reveals which practice areas or matter types are profitable versus which are being subsidised by others within the firm.

Overhead Per Partner

Total overhead costs divided across partners gives a clear picture of what each partner needs to generate just to cover their share of running the firm, before any profit is considered. This is a useful benchmark for setting individual billing targets that are grounded in the firm's actual cost structure, not a number picked out of habit.

Why These Numbers Often Go Untracked

Trust accounting compliance takes priority by necessity, and general financial reporting often gets less attention as a result. These numbers require deliberate setup and regular review, they don't appear automatically just from doing the compliance work correctly.

Getting This Visibility Set Up

• Realisation rate tracked monthly, not just reviewed at year end.
• Matter-level cost allocation, including a fair overhead share.
• Overhead per partner reviewed annually as the firm's cost base changes.