Most firms watch billable hours and stop there. The number that decides what actually reaches the bank is the effective hourly rate. That is what one recorded hour is worth after write-downs, discounts and unpaid invoices. This billable hours calculator runs the whole chain at once, from utilisation through realisation and collection to the fees you keep.
How the billable hours calculator works
Three separate leaks sit between a fee earner’s time sheet and the firm’s bank account. Each has its own measure, and a firm can look healthy on one while losing badly on another.
- Utilisation — hours recorded against the target. A fee earner recording 24 hours against a 30-hour target is at 80 per cent.
- Realisation — the share of recorded time that survives onto an invoice. Write-downs, fixed-fee overruns, duplicated work and courtesy discounts all come out here.
- Collection — the share of invoiced fees that clients actually pay. Disputes, ageing debt and write-offs come out here.
Multiplying the three together against the standard rate gives the effective hourly rate. In short, the difference between the standard value of recorded time and the fees collected is the leakage figure: hours the firm paid salary for, recorded properly, and never banked.
Reading the result
The effective hourly rate is the honest number to compare against cost. For example, if a fee earner costs the firm $110 an hour fully loaded and the effective rate is $232, the margin is real. If the standard rate is $350 and the effective rate is $232, then a third of the value of that time is disappearing somewhere between the matter and the ledger. It is worth knowing which of the three stages is doing the damage.
Leakage is the figure that tends to get attention in a partners’ meeting, because it comes in money rather than percentages. A six-lawyer firm losing 25 per cent between standard and collected is typically looking at a six-figure annual gap. Most law firm accounting software can report the three inputs directly.
Where the gap usually is
In practice, realisation is the more common culprit in smaller firms. Fee earners record the time, then write it down at billing because nobody wants an awkward conversation about a matter that ran long. Collection problems are more visible, because ageing debt shows up on a report. Realisation problems are invisible unless someone compares recorded value against invoiced value.
Low utilisation is a different problem again, and usually a supply one: not enough work, too much admin, or time that someone genuinely worked but never entered. Firms that move to same-day time entry often find utilisation rises several points without anyone working longer.
What this does not include
This billable hours calculator is a fee-side model. It does not account for contingency or success fees, fixed-fee matters priced above or below their hourly value, disbursements, or non-fee income. It also assumes a single blended rate. Firms with a wide spread between partner and associate rates should run the calculation per band and add the results.
Common questions
What is a good realisation rate?
There is no single benchmark, and treat any figure quoted as universal carefully. What matters more is the trend in your own firm and whether the gap concentrates in particular matter types, clients or fee earners.
Should unbilled time count as leakage?
In this model, yes. Time recorded and never invoiced is a cost the firm carried. Whether that is acceptable depends on why it happened — investment in a client relationship is a decision; forgetting to bill is not.
Can I use this for a fixed-fee practice?
Partly. Record the hours actually spent and enter the fixed fee divided by those hours as the standard rate, with invoiced and collected both at 100 per cent. The effective hourly rate that comes out is the real yield on that work.
Is anything sent to a server?
No. The calculation runs entirely in your browser. Nothing is transmitted, stored or logged.