In the fast-paced world of business, maintaining clear and transparent financial records is crucial for success. One of the most effective tools for achieving this is a well-structured billing statement.

But what exactly is a billing statement, and how can it benefit your business? A professional billing statement allows 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. 

This article will delve into the essentials of billing statements, offering practical advice on how to create, use, and optimize them to ensure smooth financial management and foster strong client relationships. Whether you're a solo entrepreneur or managing a growing business, understanding the ins and outs of billing statements can help you stay organized, get paid on time, and keep your clients satisfied.

• What is a billing statement?
• Billing statements are not invoices
• You are paid for billable hours
• Some hours are not billable
• 10 industries that commonly use billable hours
• Determining if your time is billable
• How to track billable hours?

What is a Billing Statement?

A billing statement is a document you issue to your clients, summarizing their transaction history over a given period and displaying any outstanding balances that need to be paid. It details when transactions were made and the charges incurred each time.

Billing statements keep your clients informed by providing information on the minimum payment they must make within a specified period (typically monthly) to keep their account current and active, and it provides accurate tax reporting for your business.

These documents offer valuable insights into account activity by clearly indicating which charges are still outstanding and which have been paid. They also show how many billable hours have been paid for, allowing you to assess the remaining hours needed for the project.

Time tracking is crucial for job costing, and a billing statement that details the billable hours spent on a project helps you evaluate future job requirements.

• By combining transaction history and outstanding payments into one report, billing statements make it easy for both you and your clients to track project progress.

Information included in a monthly billing statement

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

Billing statements are not invoices

The main differences between invoices and billing statements lie in the details listed on each document and their intended purposes.

Invoices provide a detailed description of the exact products or services your client is purchasing, including a breakdown of labor costs, shipping fees, equipment fees, and more. Invoices do not display transaction history.

In contrast, billing statements offer a broad overview of transaction history, including payments received and balances owed, typically spanning a month. Billing statements do not detail specific sales, such as product or service descriptions.

Invoices are sent from you to your client to collect payment. Billing statements are sent to keep your client updated on the current state of their account activity by reviewing transaction history over a specified period.

You are paid for billable hours

Billable hours refer to the time you spend working with a client or on a client’s project, which you can charge for once the work is completed. Establish and communicate your hourly rate to the client before you begin tracking billable hours.

Billable hours, directly paid by the client, ensure that you are financially compensated for your time and effort on a client’s project.

Once your client agrees to your hourly rate and officially hires you, you can start billing them for any time spent advancing the project. Billable hours encompass:

• Project planning and research
• Developing timelines
• Working on tasks that move the project forward
• Revising submitted work
• Any communication between you and the client (meetings, emails, phone calls, texts)
• Tracking billable hours is essential for transparent and fair compensation for your professional services.

Some hours are not billable

Not all work can be included on an invoice or counted as billable hours. Tasks categorized as non-billable include:

• Researching and pitching proposals for new work
• Consultations before a client has officially hired you
• Internal team communication
• Networking activities
• Training that benefits your business beyond individual client projects
• Administrative work such as invoicing, payment processing, and file management
• Correcting personal mistakes
• Any work unrelated to a specific client’s project
• While non-billable hours are essential to your business operations, they do not directly generate revenue and should be managed efficiently to maximize productivity and profitability.

10 industries that commonly use billable hours

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

Determining if your time is billable

There is often a fine line between billable and non-billable hours, making it understandable to question whether charging for your time is justified. Here are a few tips to help you decide:

Re-doing work: Are you re-doing work due to a personal error that could have been avoided? If so, it is not billable. However, if the client asks you to change something that was previously approved, that time is billable.

Training: Is the training course beneficial to your entire business beyond the client's scope, or has the client specifically requested it? If the latter, it qualifies as billable.

Research and onboarding: If the research or onboarding tasks (such as proposals and pitches) were performed before the client agreed to hire you, those hours cannot be billed.

Internal meetings: Internal meetings within your organization can be tricky. If you and your team work on the project and get tasks done within the scope of the contract, you may bill for those hours. However, if the meeting discusses internal business, only partially addresses the client’s project, or covers administrative tasks related to the client’s project, these hours are not billable.

By carefully evaluating these scenarios, you can ensure your billable hours are justified and transparent to your clients.

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. 

2. 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.

3. Use time tracking tools

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. QuickBooks 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. 

With small business accounting and invoicing solutions like QuickBooks Online, you can streamline how you track billable hours, collect online payments and invoice your clients automatically with free invoice templates.

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