The Problem with Vanity Metrics
Most law firms track revenue and headcount. These numbers feel important but tell you almost nothing about whether the firm is profitable or which work you should be taking on. Revenue without margin is just turnover.
Realization Rate
Realization rate is the percentage of billed time that is actually collected. A fee-earner who bills £200,000 but collects only £160,000 has an 80% realization rate. Below 85% is a warning sign; below 75% means you have a structural problem with either pricing, write-offs, or client credit risk.
Utilisation Rate
Utilisation is billable hours as a percentage of available hours. If a fee-earner works 1,800 hours per year and bills 1,260 of them, their utilisation is 70%. Most firms target 65–75% for associates and 45–55% for partners (who carry more non-billable business development work).
Matter Profitability (P&L)
The most important number for any matter is its margin: fees collected minus the cost of delivering the work (fee-earner time at cost rate, disbursements, and allocated overhead). A matter that billed £50,000 but cost £45,000 to deliver has a 10% margin — barely worth doing. Matter P&L tells you which clients and practice areas to grow.
Write-Off Analysis
Every write-off is a management decision. Track them by fee-earner, client, and matter type. If one partner writes off 20% of their time and the average is 8%, the cause is almost always one of three things: poor scoping, pricing below market, or a client relationship problem.
Aged Debt
Aged debt reports show how long invoices have been outstanding. Sort by debtor, by amount, and by age. Anything over 90 days should have a recovery plan. Anything over 180 days is at material risk of write-off.
Building Your Monthly Dashboard
Run these five reports at the start of every month: (1) realization rate by fee-earner, (2) utilisation rate by fee-earner, (3) matter P&L for all matters closed last month, (4) write-off analysis for last month, and (5) aged debt over 60 days. They take 30 minutes to review and tell you everything you need to run the firm.