Communication is key. Client’s take comfort in having up to date information on the progress of their project and the financial accounts relating to it – which is why a billing statement is so important. 

A professional billing statement will allow you and your client to keep track of billable hours and all transactions relating to the project – ensuring that you and your client stay on the same page. 

What is a Billing Statement?

A billing statement is a document issued by a seller that summarizes a buyer's transaction history over a given period of time, and will also display any outstanding balances that need to be paid. The document will show when transactions were made, and how much the buyer was charged each time.

Billing statements work as an update for clients by providing information on the minimum payment they must make in a given period (typically monthly) in order to keep their account current and active. 

These documents offer valuable insights into account activity by making it clear which charges still need to be paid, and which ones have already gone through. It will also display how many billable hours have been paid for – so you can assess how many more hours need to be spent on the project. 

Time tracking is crucial when it comes to job costing, so having a billing statement that shows the amount of billable hours spent on a project, will allow you to assess future job requirements.  

Since transaction history and outstanding payments are combined into one report, it is easy for the seller and buyer to stay on track of project progress. 

The information that goes onto a billing statement includes (we can assume it looks over a monthly period):  

• Transactions that occurred in that month 
• Minimum payments required for the month 
• Total interest charged in that month 
• Additional fees that relate to the total balance (taxes, discounts, extra charges etc) 
• Payment due date 
• Date of billing cycle 
• Client’s previous balance 
• Payments already made 
• Total outstanding balance

Invoice vs. Bill - What is the Difference? 

The main differences between invoices and billing statements are the details listed on each document, and the purpose of use. 

The information listed on an invoice provides a detailed description of the exact products or services the client is purchasing, along with a breakdown of labour costs, shipping fees, equipment fees etc. Additionally, an invoice will not display transaction history. 

Whereas the information on a billing statement is a broad overview of transaction history – including payments received and balance owed – typically spanning over a month’s time. A billing statement will not go into details on the particulars of a specific sale, such as product or service descriptions. 

Invoices are sent from the seller to the client for the purpose of collecting  payment. A billing statement is sent from the seller to the client as a way to keep up to date on the current state of account activity by looking over transaction history over a specified period of time. 

Typically invoices are sent before or after a project has been completed, and billing statements are sent monthly. However this rule may change depending on the nature of the project. 

What are Billable Hours?

Billable hours are a way to track the amount of time spent working with a client, or working on a client project, so that you can bill them once the work has been completed. Determining what your hourly rate is and communicating that to your client is an essential step that must be taken before you start recording billable hours. 

Billable hours are paid directly by the client and are tracked to assure that you will be financially compensated for the time you spend working on a client’s case.  

Once the client has accepted your hourly rate and you have been officially hired for the task, you may start billing your clients for any time spent working towards the completion of the project. Billable hours include: 

• Project planning and research 
• Developing timelines
• Working on tasks that progress project completion
• Revising submitted work
• Any communication between you and the client (meetings, emails, phone calls, texts) 

What are Non-Billable Hours? 

Just like there is some work that you can not put on an invoice, not all the work you do can count towards your billable hours. Work related tasks that are non-billable hours include: 

• Doing research and pitching proposals for new work
• Consultations that happen before the client has officially hired you
• Internal team communication 
• Networking 
• Training that benefits your business beyond an individual client 
• Administrative work including invoicing, payment processing and file management
• Fixing personal mistakes 
• Any work that is not related to the specific client’s project 

What Industries Use Billable Hours?

Here are 10 industries that commonly use billable hours: 

• Accountants 
• Architects 
• Freelancers (for example: graphic designers, photographers, jewellery designers, UX/UI designers, copywriters etc) 
• IT services 
• Legal professionals
• Consultants
• Trades professionals
• Public relations 
• Web developers
• Advertising agencies 

Is My Time Billable?

There is sometimes a fine line between billable and non-billable hours. So it is completely understandable to question whether your billable hours are justified or not. Here are a few tips you can refer to if you feel stuck: 

• Re-doing work: Are you re-doing work due a personal error that could have been avoided (in this case it is not a billable hour)? Or is the client asking you to go in and change something that has previously been approved (in this case it is a billable hour) 
• Training: Will the training course benefit your entire business outside the scope of the client, or has the training course been specifically requested by the client (if it is the latter, than it does qualify as billable) 
• Research and onboarding: If the research or onboarding task (such as proposals and pitches) were performed before the client has agreed to sign with you, you can not add those hours to their bill. 
• Internal meetings: Internal meetings within your organization can be tricky to navigate. If you are working on the project with a team, and you get work done that is within the scope of the contract, then you may bill for those hours. However if the  team meeting discusses internal business, and only partially discusses the client’s project, and/or if the team gathers to discuss administrative tasks relating to the client’s project – these will not count as billable hours.

How to Track Billable Hours

Before you track billable hours, ensure that you and your team are on the same page about your business's time tracking policy. 

That being said, here are 3 easy steps you can take to ensure you are accurately tracking billable hours and clearly communicating them with your clients. 

1. Establish an hourly rate 

The first benchmark in tracking billable hours is establishing what your hourly rate will be. Different factors will affect and determine the rate, such as your level of experience, the scope of the project, and how much other industry professionals charge for similar services. 

A general rule for calculating an hourly rate is dividing your annual income by the amount of hours you work in the year. 

2. Use time tracking software

QuickBooks Time will streamline your time tracking process by quickly showing you how many billable hours are spent on a given project. It also offers insightful reports where you can glean accurate predictions on future time needs, and job costs. 

QuickBook Time will also help your team stay organized and on schedule with updated status reports and automatic alerts to let staff know when to clock in and out. 

3. Create a billing statement 

It is no question that you need to keep track of your billable hours, but what about your clients? They also need a way to clearly see the progression of the project.

Creating professional billing statements will help you and your client keep track of billable hours. When you send out a monthly billing statement both parties will be able to see an overview of the full month's transactions, including payments that have already been made, and outstanding balances. This will be great for letting the client know how many billable hours they need to pay for, as well as forecast how many more billable hours will be required to finish the project.

With small business accounting and invoicing software like QuickBooks Online, you can streamline how you track billable hours and collect online payments.  You can also create a free billing statement template, and with its time tracking capabilities, you can track hours worked and invoice your clients automatically with free invoice templates.