What are billable hours? How to track and calculate it [with examples]

Every untracked hour is lost income for your business—and it’s a more common problem than you might think. A survey by LawPay found that 77% of legal professionals regularly underreport their billable hours, often due to manual tracking or unclear task boundaries. If you’ve ever wondered whether you're receiving compensation for all the time your firm spends on client work, you’re not alone.

In this guide, you’ll learn what billable hours are, how to track and calculate them, and see examples by industry.

Billable hours meaning

Billable hours are the hours of work you can charge a client for. That includes time spent on tasks directly related to a project, like writing reports, designing a website, or attending client meetings. If it helps move the project forward, it’s usually billable.

Billable hours are most common with lawyers, freelancers, consultants, and agencies. These professionals often charge by the hour or by project, so tracking time accurately is key to getting paid fairly.

Why billable hours matter for your business

Billable hours matter because they directly affect your revenue. They show how much of your time is going toward paying for work. Tracking them also helps measure productivity, so you know if you're pricing right or need to adjust workloads.

They’re more than just a way to track time—they’re a direct link to your profitability. The more hours you can bill, the more revenue you bring in. And when you know where your time goes, it’s easier to set rates, manage workloads, and improve margins.

Tracking billable hours also helps you plan ahead. It gives you the data you need to forecast revenue, balance your team’s capacity, and build trust with clients by showing exactly what they’re paying for.

How to calculate billable hours

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. That’s where calculating billable hours comes in. It gives you a clear picture of how much time is generating revenue versus time spent on internal or nonbillable tasks.

By tracking this metric regularly, you can identify productivity gaps, adjust workloads, and make informed decisions about hiring, pricing, and project planning.

Billable utilization rate

Your billable utilization rate shows how much of your team’s time goes to billable work. To calculate it, divide total billable hours by total available hours, then multiply by 100. For example, 32 billable hours out of a 40-hour week = 80%.

This metric matters because it tells you how efficiently your team members use their time. A low rate might mean you're overstaffed, undercharging, or spending too much time on internal tasks.

Billable utilization rate benchmarks vary by industry:

• Agencies and consultancies: 75%-85%
• Law firms: 60%-80%, depending on seniority
• Freelancers: Often aim for 70% or more

Knowing your utilization rate helps you make smarter staffing decisions and stay profitable over time.

Requirements for billable hours

Some industries have strict guidelines for tracking and reporting billable hours. In these fields, time tracking isn’t optional; it’s tied to performance reviews, client billing, and firm profitability.

Expectations also vary depending on whether you’re an employee or a freelancer. Employers often set hourly targets, while freelancers rely on detailed contracts and scopes of work to define what’s billable. Either way, clear agreements help avoid confusion and ensure you receive payment for your work.

Legal billable hours

Law firms typically set mandatory billable hour targets, often between 1,800 and 2,200 hours per year. Meeting these goals can affect promotions, bonuses, and job security. Falling short may lead to reduced pay or fewer client opportunities.

To reduce burnout, many firms are rethinking their approach—investing in automation, offering flexible schedules, and prioritizing quality of work over sheer volume. The goal is to keep lawyers productive without pushing them to the brink.

Construction billable hours

In construction, billable hours usually apply to services like project management, consulting, or specialty subcontracting. You must track time accurately to align with budgets, contracts, and compliance requirements.

Many firms rely on time tracking to bill clients by project phase or milestone. Clear documentation protects against disputes and helps keep projects on time and under budget.

Professional services billable hours

Consultants, agencies, and freelancers often bill by the hour, retainer, or project. Billable hours help show value to clients and ensure that time spent on strategy, meetings, or deliverables is accounted for.

Strong scopes of work and time tracking tools are essential in this space. They keep everyone on the same page and help avoid scope creep, billing disputes, or undercharging.

Billable hours vs. nonbillable hours

Billable hours are the tasks you can invoice clients for, like working on deliverables or attending project meetings. On the other hand, nonbillable hours include internal work like admin or marketing that supports your business but isn’t paid for by clients.

Tracking both is key to understanding where your time goes. It helps you price services accurately, improve productivity, and make smarter decisions about hiring, staffing, and workload balance.

Common billable tasks

Billable tasks are the work clients hire you to do. These are directly tied to the project scope and should be clearly outlined in your agreement.

Tasks include:

• Client meetings: Time spent discussing project progress or strategy
• Deliverables: Creating content, designs, reports, or other project work
• Emails or calls with clients: Any communication related to active work
• Project planning: Setting timelines, budgets, and task breakdowns
• Revisions: Updates or edits that fall within the agreed scope

Common nonbillable tasks

These tasks are important to running your business but don’t appear on a client invoice. Still, tracking them can help you manage overhead.

Tasks include:

• Administrative work: Scheduling, invoicing, and file organization
• Marketing: Writing blog posts, managing social media, or networking
• Internal meetings: Team syncs that aren’t tied to a client project
• Training and development: Time spent learning new tools or skills
• Business development: Proposals, pitching, or scoping new work

Gray areas: What’s billable vs. not?

Some tasks aren’t clearly billable or nonbillable—they depend on your contract or client agreement. These often fall into a gray zone.

• Prep time: Getting ready for a client meeting or project kickoff
• Research: Background work to inform client projects
• Revisions or scope creep: Extra edits or tasks outside the original agreement
• Tool setup: Software or system work specific to a client
• QA and testing: Reviewing or troubleshooting project deliverables

Examples of billable and nonbillable hours by role

Billable and nonbillable tasks can look very different depending on your role. Understanding how time is split in a typical day helps you see what’s earning revenue and what’s supporting the business behind the scenes.

Here’s a quick look at how different professionals balance client work and internal tasks during a normal workday.

Example: Fitness coach or personal trainer

A fitness coach’s day might include multiple training sessions, which are billable, plus time spent on planning routines, marketing, or answering inquiries, which aren’t.

Example breakdown (8-hour day):

• 5 hours in one-on-one or group training sessions (billable)
• 1 hour creating personalized workout plans (nonbillable)
• 2 hours on social media posts and responding to leads (marketing)

Total: 5 billable hours, 3 nonbillable

Example: Freelance designer

A freelance designer might split their time between active client projects and the work needed to run and grow their business. Only project-specific design time or client calls are billable.

Example breakdown (8-hour day):

• 4 hours designing logos and websites (billable)
• 1 hour in a client review call (billable)
• 2 hours updating their portfolio and website (marketing)
• 1 hour on invoicing and bookkeeping (admin)

Total: 5 billable hours, 3 nonbillable

How to set your billable rate

Your billable rate should reflect your experience, market demand, and the costs of running your business. It also needs to align with your income goals. If you’re undercharging, you risk burnout without the payoff. If you’re overcharging, you could price yourself out of projects or lose clients to more competitive alternatives.

A common method is to reverse-engineer your rate. Start with your desired annual income (you can use industry averages to help decide), add overhead, then divide by your expected billable hours. This gives you a solid baseline to work from.

Billable Rate = Desired Annual Income + Overhead) / Billable Hours

Some businesses stick with hourly billing, while others prefer value-based pricing. That means charging based on the results or impact of your work, not just the time it takes.

Tools for calculating your ideal hourly rate

There are plenty of tools that simplify this process. Hourly rate calculators and budget templates work best when used together—start by using a budget template to list your monthly business and personal expenses, income goals, and available working hours. Then, plug those numbers into an hourly rate calculator to see what you need to charge to meet your goals.

These tools take the guesswork out of pricing. Whether you're a freelancer or an agency, they can help you charge fairly and stay profitable.

Example: If your budget template shows $5,000 in monthly expenses and you plan to work 100 billable hours, an hourly rate calculator would suggest charging at least $50/hour just to break even—more if you want to earn a profit.

How to manage billable hours

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.

1. Track time for the project

You can track time manually with a spreadsheet or journal, but it’s easy to forget things that way. Automated time tracking tools help you log hours in real time and categorize tasks more accurately. Real-time tracking is key—it prevents missed hours and ensures your records are clear and complete.

2. Assess challenges to accurate tracking

Even with systems in place, some billable time still slips through the cracks. Common issues include:

• Forgetting to log time
• Multitasking across projects
• Mislabeling tasks
• Switching between clients without recording time
• Logging time after the fact and guessing
• Using inconsistent task names or codes 

These habits lead to lost revenue and messy records.

Time tracking software helps fix this by automating logs, setting reminders, and organizing entries by client or project. It takes the pressure off memory and improves the accuracy of your reporting.

3. Determine your billable hours

Once your time is logged, calculating billable hours like we discussed earlier is simple. Start by filtering out any nonbillable entries like admin or internal meetings. Multiply the remaining hours by your hourly rate, and add any agreed-upon extras like rush fees or materials. The result should be invoice-ready, with clear notes and time entries to support it.

4. Invoice clients

When it’s time to invoice, use a clear, professional format. List the billable hours, a short description of each task, your rate, subtotal, taxes (if applicable), and the total due. Include payment terms and a short note summarizing the work—it adds transparency and helps avoid delays or confusion.

5. Address and prevent client disputes

Disputes over billable hours usually come down to unclear communication. The best way to prevent them is to set expectations early. Always use a signed contract or scope of work, and keep detailed time logs with descriptions tied to deliverables.

If a client questions an invoice, stay calm and professional. 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.

Software that can help you track billable hours

Tracking billable hours takes more than a stopwatch. You need tools that help you log time accurately, organize tasks, and turn tracked hours into polished invoices. Whether you’re a solo freelancer, an agency, or a legal team, the right software makes it easier to stay billable and profitable.

Here are a few popular tools that help different kinds of businesses manage their billable time more effectively.

QuickBooks Time (formerly TSheets) 

QuickBooks Time offers powerful time tracking for hourly work. You can log time against specific clients or projects, apply custom billable rates, and even forecast project hours. It’s especially useful for teams juggling multiple jobs with different rates.

QuickBooks also helps you go from logged hours to paid invoices, fast. 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.

PracticePanther 

For legal professionals, PracticePanther covers the full billing process—from tracking time to sending invoices. It also helps manage client data, case files, and payments securely. Law firms use it to stay compliant, organized, and focused on client work.

Asana 

Asana is a task management platform that helps teams stay on top of project deadlines and deliverables. While it doesn’t track time on its own, it integrates with time tracking tools so you can connect tasks to billable hours. It’s perfect for agencies and consultants managing complex workflows.

Saviom

Saviom gives resource managers a bird’s-eye view of how teams spend their time. It’s ideal for larger companies that need to balance billable and nonbillable hours across departments. Use it to plan better, reduce downtime, and improve project profitability.

Final tips to maximize billable time

If you want to bill more without burning out, start with a time audit. Review how your team spends each day—then cut low-value tasks or automate them. Use tools to streamline admin work, like follow-ups or project tracking, and automate tasks like sending invoice reminders.

Strong client boundaries also help. Clear contracts and scopes of work make it easier to stick to what’s billable and avoid scope creep. You’ll protect your time—and your profit margins.

Stop underbilling and overdelivering

Many professionals don’t charge for all the work they actually do. 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.

Fair pricing benefits everyone—it sets expectations, builds trust, and ensures you get paid for the value you provide.

Take control of your time and profits

Getting a handle on billable hours isn’t just about better time tracking—it’s about running a smarter business. Know what’s billable, track it consistently, and invoice clearly. Those small changes add up to better cash flow and less stress.

Start now with QuickBooks accounting software. The sooner you begin, the easier it gets to protect your time and grow your profits.