Billable hours: What Are Billable Hours? How to Get Paid on Time

Billable hours

Here are some general examples of billable and non-billable activities during a team member’s workday. On average, that typically means billing around 30 hours out of 40 working hours a week. For some high-performing fields, that number may be even higher. Between Curdbee & their new version, Hiveage, I’ve brought in more than $310,000 than I would otherwise not have. If I ever need to send an invoice, I know it’s gonna work, and I know they’re gonna get it, and I’ll know when they’ve seen it and paid or not paid it. At least if everything else gets hard, I know I’ve got a system there that’ll let me get paid.

  • In this manner, they can become self-sufficient instead of paying hefty bills for consulting hours.
  • Plus, they get the specifics on the tasks they pay for and the total rate.
  • Billable time tracking forms an important aspect of the functions of every company or organization.
  • It might seem silly in the moment to track a five-minute phone meeting or the two minutes it takes to send a work email.

They have to practice effective communication, constructing recommendations, and may even conduct research. Due to the wide range of work they may have to undertake while on the job, it is best to charge clients based on the working hours dedicated to their project. Because of the cost difference, the first choice for any organization is always to use its internal workforce over a consulting resource. However, a lack of the necessary skill sets and tight project deadlines may force them to look for a consulting option. A consultant also cannot get work at a specific client site for a continuous period and gets engaged only when his skills are needed.

Although seemingly simple, it can be easy to misconstrue what is considered billable and non-billable time. Billable hours unify planned and actual costs via consultants’ utilization. Comparison between actual and estimated consulting hours allows consultancy firms to set reasonable billable hours for the clients.

How to mark project hours as billable or unbillable

Very few of us have a memory strong enough to sustain that kind of tracking. That’s why automating this process can save you time and ensure you’re billing clients for all the time you spend on their projects. While clients may not pay for this time, it is still necessary.

Billable hours

You can delegate tasks before your team burns out because you will be able to tell if they are under too much pressure. You will also know when your employees are spending more time on non-billable hours than billable, and can then address the issue. Non-billable hours also include activities that employees do for their own benefit, for example, taking a 5-minute break to freshen up, or eating. These activities are not directly related to work tasks but contribute to the employee’s total hours. Billable hours are the total amount of time you spend working on a particular project. These hours are charged to a client according to an agreed hourly rate.

How to Track Billable Hours

It’s important to track billable hours in real-time with time tracking app to avoid losing untracked billable time. Automated tracking of non-billable hours also streamlines billing and invoicing. It also improves employees’ morale, saves time, and makes the clients happy. When there’s no project tracking in real-time, it’s not possible to measure billable and non-billable hours accurately.

Various forms of technology have been developed to track the billable hours generated by employees. Employees can use billable hours tracking software such as TimeCamp to record the time spent on a particular project. They’ll be punching in the time against task or project codes. A billable hours chart will help project managers, clients, and yourself to how many billable hours in a year were used in a particular project. A time tracking system with a billable hours calculator will help you to efficiently track billable hours and ensure you get paid as you should.

Because tracking is done as you go (and on the go), you won’t miss out on opportunities to bill. With just a single click, you can bill your clients for tasks and communications. Hubstaff’s time tracking software, payroll, invoicing, and time reporting can help you track billable and non-billable work.

Ranging from law to advertising, several sectors of work use this form of charging a client. Before a business, agency, or freelancer starts working with a client, they must first come to an agreement on the rate charged per hour. Work of higher quality or precision, and done by prestigious or well-established businesses, tend to be more expensive.

When your employees spend most of their time on non-billable activities, it’s hard to grow your business without adding more people (which increases fixed costs). The standard process for calculating billable hours looks something like this. The benefits of staying on top of the billable hours worked should never be underestimated.

If not explicitly expressed in the contract, then the worker has the power to work for as long as they want, with no cap on their fees. Sometimes a service provider may argue against a cap, claiming that they do not know how long a project is going to take. This can be an issue for the client, unless the project is closely monitored and safeguards are in place. Billable hours come into play when there is no definitive way to charge a client for a product or service that accurately includes all the time spent on it. Many times, client organizations engage consulting firms to help them select a specific product or decide on a software solution. Since these require significant investment and are related to strategic direction, they are interested in taking a second opinion on their choices.

You can create more accurate invoices by tracking the time you worked for your clients. You won’t overcharge for your services if you know exactly how much time each case requires. As a result, you will gain your client’s trust, which will enable you to attract more potential customers in the future.

The advantage of billing time to clients with set billing rates is that it gives your client a clear picture of how you spent your time and why it is worth their money. Tracking hours you’re billing also ensures you will be paid for any overtime hours worked. This is especially useful for legal professionals or law firms.

We’ll help you fully comprehend what billable and non-billable hours are, including the best practices to increase the billable time. If you review missing time once a month, it is very easy to lose track of time (literally). Many law firms have an accounting or billing person do a review or audit each Monday to track down any missing time from the previous week.

Editing a pre-existing manual time entry

Then why do organizations have to hire consultants despite their expensive billable hours? It is because the organization needs external support to achieve its business objectives, which otherwise isn’t possible with its existing workforce. When clients can see the details of the work done on their case, in clear, simple, language, there is less confusion and fewer disputes over billing. We saw in one Yale Law School report that there is a vast divide between actual hours and billable hours.

  • Both billable and non-billable hours should be treated like a precious resource and tracked and scheduled accordingly.
  • Comparison between actual and estimated consulting hours allows consultancy firms to set reasonable billable hours for the clients.
  • This article offers a full guide to creating invoices for your services.
  • Clients or businesses should have specific policies regarding whether certain things like travel time will be billed or non-billed hours.
  • Tracking billable hours will help you keep your finances in order and make sure you get paid for every minute of work you perform for clients.

When keeping track of time spent on each task is simple, your reports will be accurate, and creating invoices is a piece of cake. The amount of time spent on a job varies from each assignment and the number of tasks they require. Thus, this can seem like a lot, considering that a full-time worker typically works about 40 in a week. Consultants aid people in different areas of work, from business and marketing to education and administration.

Ways in Which Digitization Is Changing Business World

Download our billable hours tracking software and uncover the full range of possibilities. To capture the hours spent on a project, you’d better use time tracking software to make the process easier and more convenient. Since some non-billable hours help speed up the project, it is good to track this, so you can know how much non-billable time is required for a particular project. If more non-billable hours are required for a project, you may be working at a loss. You may need to renegotiate with the client or add the non-billable hours to the invoice and let the client know why you need to be paid for these. Tracking work hours helps you as a PM to know how much time your team uses.

In case you can’t tell what you did at a particular time concerning the project, you might end up with inaccurate results. It’s known that procrastination is prevalent among individuals, with some even taking up to 2 hours procrastinating on a task. It’s fine to have queries, but employees might end up wasting time. Before automating non-billable work, you need to take your time to monitor and analyze them to know which ones consume a lot of time.