Is it Time to Abandon Cost Recovery? The 2018 Survey Results Tell a Different Story

If a Firm does not want to charge a client for an item, they have 2 choices:

  1. Charge it to a non-billable matter number (Overhead) or
  2. Write it off after it is charged to a legitimate billable client matter number.

The preferred (and most popular) method is to charge the item to the matter and then write it off so the firm can keep track of and manage its costs.

Since we started this survey in 2004, the “Billable Actually Paid” rate has been relatively stable in the mid-to-high 80% range. The “Billable Actually Paid” is the measurement of what percentage of copies, prints and scan charges clients actually paid for when presented to them.  This trend continued in 2018 with this percentage coming in at a healthy 86% down slightly from 89% in 2016.

However, as strong and consistent as this measure has been, it does not tell the whole story. The Billable Percentage and the “Billable Actually Billed” are the other 2 key factors.

The average billable percentage is the percentage of billable items versus the total of all items. For example, if 7 copies are billable to a client out of the 10 copies made, then the billable percentage is 70%.  For the five areas we measure, the billable percentage in 2014 and 2016, the average was 60% and 58% respectively. In 2018, this number came in at 58%, so again no degradation.

Lastly, we measure the “Billable Actually Billed.” This is the percentage of items written off in the pre-bill stage.  This number came in at 74% in 2018, roughly the same percentage as 2014 and 6% percentage points higher than in 2016.

What is the conclusion based on the initial review of the 2018 data?  The assault on the recovery of costs has stabilized and the argument can even be made that it has rebounded slightly.

So, when we question whether it is time to abandon cost recovery at your firm, it is a decision that should not be made lightly as the recovery of these costs are stable.  A full analysis must be done on your client make-up, peer firms, how your rates compare to the market and your cost of collection.  In addition to the above, knowing your billable percentages, and your internal and external write-offs are critical. Only then will you get a true picture of where your firm stands.

The Mattern 2018 Cost Recovery Survey is a great place to start.  Customized results will be delivered to participating firms soon, and we will make Overview results available to non-participants.  Non participating firms can click here let us know your interest in the Overview results.