What is the difference between realization and utilization? And what are WIP write offs vs A/R write offs? No one ever explained this to me and now I am a second year and to embarrassed to ask 🫠

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Realization = how much money is made off you, as compared to how many hours you billed. So when people are saying how first years make their salary back even if they only bill a 1000 hours or whatever, it doesn’t give you the full picture unless you know how many of those hours made it on the bill and how much fees got collected from clients. If 90% of your hours got paid for by clients, you’d be at 90% realization.

Utilization = how many hours you’re working versus the billable requirement. So if it’s 1950 and you’re at 2000 you’re at 102% utilization.

WIP = work in progress. I think this means write offs before sending the bill.

A/R = accounts receivable. I think this means write offs when the bill was sent but they weren’t able to
collect all of it and decided to give up.

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Agreed, OC1. I should have been more clear, OP was asking about “WIP write offs” and “A/R write offs” so I meant those.

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You may have thought of this but in case you haven’t: you don’t have to direct these questions to your colleagues or partners if you have the option of asking the billing department. I’m a 6th year and at my new firm I’ve asked so many questions about my financial profile with numbers, gadgets and whatsits galore!

Remember: the more you know about your financials, the better equipped you are to negotiate your future comp.

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It’s not really relevant to a second year. Just bill your hours.

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Yeah in normally-ran firms realization is partners’ headache. Unless you overbill by a lot.

Is 90% actualization good? Viewed favorably by the firm, I mean? Asking for myself

Note that sometimes (rarely) you can get >100% realization (eg matters on fixed fees where there’s not much to do / you’ve managed to push work on OC).

F

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