Realization measures how much of the time you worked actually turns into money. Billing realization is billed over worked value; collection realization is collected over billed — the two leaks between effort and cash.
The example
$18k billed of $20k worked.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | Billed / worked | |
| 3 | Realization | → 90% |
The formula
The formula:
How it works
How it works:
- Worked value = hours × standard rate — the full value of effort.
- Billing realization = billed ÷ worked — what survived write-downs onto the invoice.
- Collection realization = collected ÷ billed — what the client actually paid.
- Overall realization = collected ÷ worked = the product of the two.
Two multiplied leaks. If you bill 90% of worked value and collect 90% of what you bill, overall realization is 0.9 × 0.9 = 81% — nearly a fifth of the effort never becomes cash. Splitting the metric tells you where the leak is: low billing realization is a pricing/write-down problem; low collection realization is a billing/AR problem. They need different fixes.
Try it: interactive demo
Worked, billed, and collected value.
Variations
Collection realization
Collected vs billed:
Overall realization
Collected vs worked:
Write-down amount
Lost to billing:
Pitfalls & errors
Worked at standard. Worked value uses standard rates, not discounted ones.
Billing vs collection. Two different ratios — keep them separate.
Overall is the product. Collected ÷ worked = billing × collection realization.
Practice workbook
Frequently asked questions
How do I calculate realization rate in Excel?
What's the difference between billing and collection realization?
How do I find the write-down?
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