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A collection policy to avoid write-downs
A firm’s realization rate is fundamental to “The Business of Law.” Realization is simply the percentage of what is billed that is actually collected, and in today’s economy low realization remains the biggest financial problem for most lawyers. A 95 percent realization rate means that, even as the firm pays expenses at 100 cents on the dollar, it is earning five cents less. This is lost cash flow, and cannot continue. For any firm, the old advertising cliché, “we lose a little money on each sale but make it up in the volume,” is simply suicidal.