If you’re not sure whether a specific task is billable, consider whether it’s necessary for the project and actively advances progress. For time to be billable, it should be spent working on tasks outlined in the project’s contract. According to Yale Law School, for a law firm, the target billable hours are usually between 1,700 and 2,300 hours per year.
When it’s time to invoice, add up all the billable hours for the project. If you charge different rates for different services or individuals, make sure to keep all the hours for different services separate. For example, you may need to add up research hours, meeting hours, and work hours as three separate service lines. Common examples of non-billable hours include administrative work, accounting, promotion and advertising, and developing proposals for new clients. These are all important tasks, but they don’t advance a specific project for your client, so they are categorized as non-billable hours.
“It’s a problem when an AI platform doesn’t have citations,” he said. “You don’t know where it’s drawing from.” In other words, the human element is essential. Haroun acquired a law degree at Columbia Law School before a career in consulting, tech, and AI that saw him sell another company, Text IQ, to Relativity in 2021. Think of them as the behind-the-scenes work that keeps everything running smoothly. They’re still valuable, even though clients don’t pay for them directly.
When you know how many billable hours you’ve spent on a project, you can compare that to labor and materials expended to determine the project’s profitability. Once you’ve added up all your billable hours for each service, multiply them by your hourly rate for that service. Use a timesheet or time-tracking software to record your billable hours. Make sure to organize your billable hours chart according to task, project, and client. You can track time, create detailed invoices, and manage payments in one place. It’s a great fit for freelancers and small teams who want to keep finances and billing under one roof.
Or, if you’re spending a lot of time invoicing, you may want to invest in accounting software that allows you to automate the invoicing and billing process. To streamline your financial management and save valuable time, consider exploring options for the best accounting software for your business needs. Organizations typically charge clients based on the time and effort spent on their projects. By diligently tracking billable hours, firms can provide clients with precise invoices reflecting the work performed. This ensures that clients are charged fairly for the services they receive, fostering trust and credibility while maintaining strong relationships.
Walk them through the time entries, explain how they align with the agreed scope, and listen to their concerns. Most issues can be resolved with transparency and a willingness to collaborate on a solution. Here’s a quick look at how different professionals balance client work and internal tasks during a normal workday. Export data in multiple formats and seamlessly integrate with your invoicing workflow. Account for additional fees, if applicable, for materials or rush fees. Total billable amount after calculating these should be included with final invoice for comprehensive billing.
Time Sheet Automation
The Summary report offers an overview of your tracked time and can be filtered by team, client, project, task, billable, tag, or description. If you have multiple team members working on projects, they may have different rates depending on their experience levels and responsibilities. For example, junior team members may have a lower billable rate than senior members. Overdelivering may feel like good service, but it chips away at your bottom line. When you track time well and define clear deliverables, you can charge with confidence.
Maintaining a healthy utilization rate is key to both personal success and company growth. If it’s too low, it might mean you’re spending too much time on tasks that don’t generate revenue. While specialized software like WebWork provides the most comprehensive solution for calculating billable hours, alternative methods exist for businesses with different needs or constraints. By tracking billable and non-billable billable hours hours, you can identify inefficiencies and focus more on revenue-generating activities. After all, your time is valuable, and every minute spent on billable hours will help you scale and increase your business’ profitability.
How to Calculate Billable Hours Accurately
Using precise time-tracking tools ensures accurate records of all activities. When non-billable activities aren’t tracked properly, businesses may underestimate the time spent on essential but unpaid work. This can lead to teams being overburdened with internal tasks, reducing overall productivity. Once you’ve calculated your total billable hours, multiply them by the agreed hourly rate. The hourly rate is typically set during the contract negotiation with your client. When you calculate billable hours accurately, you ensure you’re paid fairly for your work or pay your employees fairly.
Managing billable hours means more than just tracking time—it’s about capturing every billable moment, calculating it accurately, and invoicing clients clearly. Getting this right improves your cash flow, boosts profitability, and helps build trust with your clients. To run a profitable business, you need more than just a solid hourly rate; you also need to know how efficiently your time is being used. It gives you a clear picture of how much time is generating revenue versus time spent on internal or nonbillable tasks.
The app lets you create billable rates for workspace, workspace members, projects, and project-user levels. Billable rates can vary between members, clients, or projects, so it’s important to take some time to set them up correctly. Time tracking software like TaskFord, Toggle Track, or Harvest helps businesses maintain accurate logs. Employees should enter time as they work rather than relying on memory, reducing errors. Billing by the hour is standard practice in many industries, including law firms, accounting practices, advertising, and consulting agencies. Hourly billing is also common for many freelancers in fields like graphic design and web development.
- If you work with a team, encourage each employee to send you a list of updates on the projects they’re working on at the end of the workday.
- From marketing to finance, discover the best automation tools and a practical roadmap for small businesses to save time and scale smarter.
- Billable hours are the hours you spend on tasks that can be invoiced to a client.
- Billable hours help you track the number of hours spent on any given task or project each working day.
Billable hours refer to the time spent on tasks that can be invoiced directly to clients. This includes effort related to billable work, which is directly linked to a client project; the opposite of these are non-billable hours such as within administrative tasks, internal meetings. To accurately gauge the overall utilization rates of the workforce, organizations must consistently track their billable and non-billable hours.
- This includes anything related to the task at hand — from answering a quick phone call to sending out a work email.
- Firms can reward employees based on their productivity and contribution to their success.
- Many firms rely on time tracking to bill clients by project phase or milestone.
- This could be anything from preparing reports, attending client meetings, conducting research, or working on a project.
Streamline your time tracking with our Slack-integrated timesheet tool. Track billable hours, generate reports, and invoice clients automatically. Calculate the value of your billable time based on your rate and duration.
For some employees, tracking their time with software can feel like a burden or an invasion of privacy. Those in creative or technical roles may see it as unnecessary micromanagement, while others may struggle with complicated time-tracking software. Maintaining a good ratio of billable to non-billable hours is crucial here. For example, if you worked 40 hours in a week and 32 of those were billable, your utilization rate would be 80%. This number can help you assess productivity and find areas for improvement.