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KPI of the Day – Business Consulting (BC): % Realization rate

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realization rate

Definition

Measures the percentage of revenue actually earned relative to the potential revenue represented by list prices.

Purpose

To indicate the company’s ability to bill at its list prices, as clients usually tend to negotiate for price reductions.

Recommendations

Most businesses require a good benchmark for their financial performance. Especially popular with legal companies, % Realization rates are an expression of a company’s ability to bill at its standard billing rates. The difference between % Realization rate and $ Profitability is that the latter encompasses the first, while also dealing with other additional variables such as: leverage, margin and resource utilization.

A business in need of efficient management will look at its % Realization rate to understand what it is actually earning. This data further enables the company to both calculate appropriate billing, and prepare its annual budget. Increasing % Realization rates helps companies maximize their profits, and several ways to do that are recommended here on:

  • Managing discounts and other price deductions to improve billing realization;
  • Optimizing collections so as to ensure bottom line profitability;
  • Streamlining billing and cash collection processes.

The % Realization rate is an important indicator for evaluating performance. Not only it helps assess customer billing processes, but it also reflects on profitability levels for sustainable business continuity. By measuring the difference between what companies record as time and what percentage of that time is billable to the client, companies can also evaluate the efficiency of their staffs.


If you are interested in more Business Consulting-related KPIs, smartKPIs.com subscriptions provide access to +500 KPI examples.

Our dedicated Library contains relevant resources to improve your KPI practices, and if you want to further improve your knowledge, feel free to explore our latest publication – Top 25 Business Consulting KPIs: 2016 Extended Edition, download our webinar on this topic – Business scenarios in strategic planning, or maybe even enroll in our course, Applied Strategy and Business Performance Improvement with KPIs, which provides a three-day roadmap for the long-term improvement of your organization.

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KPI of the Day – Human Resources (HRM): $ Human capital value added
KPI of the Day – HR: # Rookie ratio
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