What Do LeanLaw's WIP, Realization, and Velocity Reports Show?

Work in progress, realization, and velocity each answer a different half of one question: is time worked turning into cash, and how quickly? WIP is unbilled work. Realization compares billed to worked. Velocity tracks the trip from time entry to invoice to payment.

The pipeline these three numbers sit on

Every hour a timekeeper logs moves through the same sequence: worked, then billed, then collected. WIP is the pile sitting between “worked” and “billed” — time that’s real and logged but hasn’t gone out on an invoice yet. Realization rate is the ratio between what actually got billed and what was worked, after any write-downs or adjustments. Collection rate is the next link in the chain: what got billed against what actually landed in the bank. Velocity, or cash velocity, is the clock running underneath all three — how long the whole trip from work to cash tends to take for a firm built the way yours is.

Picture a hypothetical firm that logs $50,000 of time as WIP in a month. After the usual adjustments, $42,000 of it goes out as invoices — a realization rate worth noticing sits near 84%. By the close of that billing cycle, $36,000 of the $42,000 billed has actually been collected, an 86% collection rate on what was billed. Neither number alone tells you where the leak is. Together, they do: this firm loses more between worked and billed than it loses between billed and paid, which points the next conversation at the difference between a write-down and a discount, not at collections.

Flip the same two numbers around and the diagnosis changes entirely. A firm billing $42,000 of $50,000 worked but collecting only $30,000 of what it billed has a strong realization rate and a weak collection rate — a firm that’s disciplined about what it invoices but loose about following up once the invoice is out. Same two ratios, same starting number, a completely different conversation with the person who owns collections rather than the person who reviews prebills.

Where each one leaks depending on how you bill

An hourly firm’s biggest exposure sits at the worked-to-billed step: time gets logged and then quietly written off or discounted before it ever reaches an invoice, which is exactly what a soft realization rate is showing you. A flat-fee firm doesn’t have a realization problem in that same sense, because the bill is fixed regardless of hours worked — its risk is margin, whether the flat fee actually covered what the matter took, which realization as a ratio can’t see. A contingent-fee firm doesn’t bill in the traditional sense at all until a matter resolves, so its exposure sits almost entirely in velocity: cash doesn’t move until a case settles, however long that takes for this particular file.

Reading WIP as of a date in the past

WIP as of any given date is just two facts intersected: which time entries existed by that date, and which of those had already been invoiced by that date. Because both of those are dated facts rather than a live-only snapshot, a system that keeps entry dates and billing status attached to the time itself can, in principle, reconstruct WIP as of any past date, not only today’s. The test worth running on your current setup: pick a closing date from a prior quarter — the kind an audit letter would reference — and see whether it can tell you what was unbilled as of that specific date, or only what’s unbilled right now. If it’s only the second one, the report exists; the history behind it doesn’t.

This matters most for the kind of request that shows up outside a firm’s normal reporting rhythm: a bank asking for an audit letter stating WIP as of December 31st, months after the fact, when some of that work has since been billed and some hasn’t. Answering that accurately means being able to look backward through time entries and invoice dates together, not just pulling today’s unbilled total and assuming it was the same number three months ago.

What this depends on

• Whether your firm bills hourly, flat fee, or contingent, since that decides which of these numbers actually carries the risk for you.
• Whether your books run cash or accrual, which changes how WIP and unbilled work are treated for reporting purposes.
• How “billed” is defined at your firm — at standard rate, or net of routine write-downs — since that changes what a realization number means.
• Whether “collected” is measured gross or net of payment processing costs.

The number worth asking about first

Most firms already sense that something in the pipeline runs slower than it should. The useful move isn’t picking a single number to watch every month — it’s figuring out which stage, worked-to-billed, billed-to-collected, or the clock running under both, is where the money is actually getting stuck for a firm built the way yours is.

Related questions

Can these numbers be broken out by partner or originating attorney, not just firm-wide? Splitting WIP, realization, and collection by the attorney who worked or originated a matter is the same set of numbers viewed through a different lens, not a separate report.

Shouldn’t WIP show up on the balance sheet as an unbilled receivable? On a cash-basis firm, which is most of them, WIP typically doesn’t appear on the balance sheet at all since revenue isn’t recognized until billed; a firm running on accrual accounting may capitalize it as an unbilled receivable instead, which is a decision for your accountant, not a default either way.