The Recovery Rate You've Never Measured
Effective hourly rate tells you what your work actually earns after write-offs and fixed fees. Here's how to measure recovery and act on it.
Most firms track two numbers when it comes to time: hours worked and dollars billed. Both feel important. Neither tells you the number that actually governs your margin — recovery rate. That's the gap between the value of the time you record and the fee you eventually collect for it. And in a lot of practices, it's the single most expensive figure nobody is watching.
If you run productised compliance packages or fixed fees — as most modern firms now do — recovery is where fixed pricing meets variable effort. It's the honest scorecard for whether your pricing, your scope, and your delivery are actually working together. This is the reporting layer that good client accounting software should surface, but most practices never look for.
What recovery rate actually is
Recovery rate is straightforward to define and easy to ignore. Take the standard value of the time recorded on a job — hours multiplied by charge-out rates — and compare it to the fee you actually billed and collected.
- 100% recovery means you billed exactly what the recorded time was worth at standard rates.
- Below 100% means you wrote off time, discounted, or the fixed fee didn't cover the effort.
- Above 100% means the job ran efficiently — you delivered the outcome in less time than the fee assumed.
For a fixed-fee firm, this is the whole game. The client agreed to a price. Your profit depends entirely on how many hours it took you to earn it. A BAS package priced at $250 that consumes four hours of senior time has quietly become a loss-maker, and you'd never know from the invoice — the invoice looks fine. It's the recovery calculation that exposes it.
Why the number stays hidden
Recovery hides because it lives across two systems that rarely talk to each other. Time sits in a timesheet. Fees sit in an invoice. Unless something joins them at the job level, you're left comparing totals at year-end — long after you could do anything about a specific client.
The other reason it hides: partial write-offs feel invisible. When a manager quietly drops two hours off a job before billing "because we went over," that decision is rarely recorded as a write-off against WIP. It just... doesn't get billed. Multiply that instinct across a busy tax season and you have a recovery leak that never appears on any report. This is the exact problem the WIP write-off trap creates — unbilled time that quietly erodes margin without ever being named.
Recovery is a client-level metric, not a firm-level one
Here's where most reporting goes wrong. Firms look at total billings versus total time and get a blended recovery figure — say, 82% — and conclude things are "roughly fine." But 82% across the firm might be hiding a portfolio where half your clients recover at 110% and the other half at 60%.
That distribution matters far more than the average, because it tells you which clients to reprice, rescope, or let go. A blended number tells you nothing actionable. A per-client, per-job-type recovery breakdown tells you exactly where your effort is being underpaid.
This is why recovery belongs inside your accounting client management software rather than in a spreadsheet. When time, jobs, and invoices live in one system — as they do in Finye, where time and WIP sit alongside the work items and invoicing on the same client record — recovery can be calculated per job automatically. You see the client, the package, the recorded time, the fee, and the resulting recovery in one place, without exporting anything.
The three causes of low recovery
When a job recovers poorly, it's almost always one of three things. Naming the cause is what makes the number useful.
1. The fee was wrong
The package was priced without understanding the real effort involved. This is a pricing problem, and it's fixable at the next renewal. If a client type consistently recovers below 80% across multiple jobs, the price is simply too low for the work — no amount of efficiency will close that gap.
2. The scope crept
The fee was right for the agreed work, but you did more. Extra queries, a messy set of records, a director who keeps changing the numbers. This is a scope problem, and it points straight back to your engagement letter and your willingness to raise a variation when the work expands.
3. The delivery was inefficient
The fee and scope were both fine, but the job took too long — rework, poor handoffs, a document that arrived three chases late. This is an internal problem, and it's the one you fix with better workflow rather than repricing the client.
The point of measuring recovery isn't to find someone to blame. It's to sort your low-recovery jobs into these three buckets so you know whether to change the price, tighten the scope, or fix the process.
Turning recovery into a habit
A recovery number you look at once a year is trivia. A recovery number you review monthly is a management tool. Here's a practical rhythm:
- Record time honestly, even on fixed-fee jobs. If your team stops entering time because "the fee is fixed anyway," you lose the ability to measure recovery entirely. Time on fixed-fee work isn't for billing — it's for measuring profitability.
- Bill at the natural close of the job. The longer time sits as WIP, the more likely it is to be forgotten, discounted, or aged out. Closing the gap between finished work and the invoice protects recovery directly.
- Review recovery by client type each month. Sort your job types from best to worst recovery. The bottom of that list is your repricing shortlist for the next renewal cycle.
- Log every write-off as a write-off. If time gets dropped before billing, record it. An unrecorded write-off is a lesson you'll never learn from.
What good looks like
There is no universal target — a high-volume BAS practice runs differently to an advisory firm. But within your own practice, recovery should be stable and improving. If your compliance packages recover consistently above 90% and your worst client types are trending up after you've repriced them, your pricing and delivery are in sync.
The firms that grow margin without raising prices aren't working harder. They've simply stopped subsidising a handful of unprofitable clients they never knew they were carrying. Recovery rate is how you find them. It's the one figure that connects the time your team records, the WIP sitting on your books, and the fees you actually collect — and once you can see it per client, the decisions get a lot easier to make.