Bookkeeping processes

What are billable hours? How to track and calculate them

Billable hours are any hours worked that must be compensated. If you spend four hours balancing a client’s books, and you’re paid by the hour, you have four billable hours. However, you have to have a record of your time worked to bill that time to the client. And that’s just one step to recording and being paid for billable hours.

Requirements for billable hours

Technically, a lot of people work billable hours—think contractors or freelancers. But few industries have requirements for billable hours. One exception is the legal industry, where many attorneys are required to work a certain number of billable hours each year. Legal professionals who fail to hit that number or a close milestone can be fired.

Consultants and temporary workers are two other groups that use billable hours frequently. One requirement both might face is recording their non-billable hours to get paid for all the time they’re at work. Billable hours are tied to the client. But their employer must pay for all working hours (including non-billable hours) they spend on other tasks. If the employee is hourly, they must keep track of billable and non-billable hours.

If you are required to track your billable hours, you may benefit from an automated time tracking solution. A digital time tracker can help you record all your working hours. Some tools make it easy to track time against clients or jobs, so you can bill more accurately for the work you do. From there, you can take your hours tracked and create an invoice that’s easy to back up with time data.

Billable hours examples

Billable hours seem like they should be black and white, but they aren’t always. Generally, if you can tie your work back to the client, your time is billable.

For instance, answering an email from your boss does not constitute billable time. Answering an email to a client, though, is billable time. Attending a mid-year review to talk about your performance is not billable time. Attending a mid-day meeting with a client is billable time.

The legal industry is unique. In most cases, professionals are required to work a number of billable hours in a year to maintain employment. The average number of required billable hours in 2015 was 1,892, according to the National Association for Legal Professionals. But billable hours make up only a percentage of an attorney’s working hours, as a 2018 Yale report shows. The report assumes lawyers may take off five weeks of work in a year for PTO or vacation. To achieve 1,832 billable hours, the associate would have to work 10 hours and 20 minutes a day, every day, for 47 weeks.

To meet today’s industry average of 1,892 billable hours, an associate would have to add 60 more hours in the year. That’s around 15 more minutes of billable time a day, which culminates in an average workday of 10 hours and 35 minutes.

Example of an attorney’s billable and non-billable hours

Billable hours:

  • Work on your client’s case from 9:15 AM to 12 PM.
  • Resume work on your client’s case, and work from 1 PM to 3:45 PM.
  • Get back to work on client material, and don’t stop until 6:35 PM.

Non-billable hours:

  • Spend 30 minutes going through emails and other correspondence.
  • Attend a 30-minute team meeting about casework.
  • Take 15 minutes to grab a coffee and use the bathroom.
  • Take an hourlong lunch break.
  • Take another 15-minute break.

That’s the kind of schedule an attorney would need to keep up to hit 1,892 billable hours in a year. It means never letting a meeting run over 30 minutes, never leaving work early for an appointment. And in the end, the result isn’t just 1,892 billable hours—it’s 2,480 hours at work.

  • For workers like consultants, freelancers, and contractors, a full day’s work, hopefully, looks a little different. Especially if the person working manages their own hours.

Example of a contractor’s billable and non-billable hours

Billable hours:

  • Spend an hour going over a client’s account, in preparation for an in-person meeting.
  • Meet with the client from 10:30 AM to 11:30 AM.
  • Compile your notes for 30 minutes, and send a follow-up email to the client, outlining the next steps.
  • Respond to client questions for 15 minutes about the follow-up email.
  • Work on your current client’s account until 5 PM.

Non-billable hours:

  • Spend 30 minutes going through emails and other correspondence.
  • Spend an hour creating an email campaign you plan to use to market your services.
  • Take an hourlong lunch break.
  • Spend 30 minutes responding to an inquiry from a potential client.
  • Take a 15-minute break.

Billable versus non-billable hours

If a client is paying you per hour, any work you do on their behalf is considered billable. Any work you do for yourself, your business, or your team—unrelated to the client—is non-billable. Depending on your industry, here are a few tasks that may count as billable hours.

Billable-hour tasks

  • Responding to client questions or correspondence.
  • Performing any work related to the client.
  • Brainstorming for client projects.
  • Doing research related to the client.
  • Attending meetings with the client or related to the client’s project.
  • Planning client meetings, client project timelines, etc.
  • Working on client revisions or responding to client revisions.

Whether you’re a business owner or an employee, not every task constitutes billable hours. Generally, non-billable hours are the time you spend on any tasks unrelated to the client or their work.

Non-billable-hour tasks

  • Marketing your business.
  • Answering emails unrelated to the client.
  • Going to teambuilding and networking events.
  • Attending team meetings unrelated to the client.
  • Planning business initiatives and goals.
  • Completing administrative tasks like payroll or hiring.
  • Creating plans and proposals for future clients.
  • Corresponding with potential clients.
  • Attending any meetings with people who aren’t yet contracted clients.
  • Attending training or completing coursework related to your work, in general.

How to calculate billable hours

  1. Set an hourly rate for your billable hours.
  2. Track and record your billable hours.
  3. Add up your billable hours.
  4. Multiply your billable hours by your hourly rate.
  5. Add any additional fees or taxes to your client’s invoice.

Billable hours Excel template

Download the billable hours’ template for Excel to record your hours worked and hourly pay rate for each client or project in a day. For best results, enter values on your desktop to calculate your total for invoicing automatically. As you work on a client or project, enter your times in and time out. The billable hours’ template does not account for non-billable hours. It does not include spaces for sick time, overtime, holiday pay, or other fees and paycheck deductions.

Download the free billable hours Excel template

Software that can help your track billable hours

Calculating billable time isn’t the challenging part. Tracking and recording that time, invoicing for that time, and determining the productivity of that time is far more challenging. But for those tasks, there are tools that can help.

1. Saviom

Companies with lots of moving parts can benefit from the insights achieved through Saviom, a resource management and workforce planning software. Regarding billable hours, Saviom can help managers better understand their employees’ workflows, projects, and productivity. From there, it’s easy to make adjustments to billable and non-billable time to increase productivity and output.

2. TSheets

To invoice for billable time, you have to track time. And there’s no better tool for tracking time than TSheets. With TSheets time tracking, you can track time against clients but also against jobs or projects for those clients. Customize your billing with the option to set billable rates, depending on the client or job. Upgrade your account to get job costing features that let you track time against a project’s expected number of hours. Use retrospective reports to inform your decisions and craft more accurate estimates.

3. PracticePanther

If you’re operating in the legal industry, you might try PracticePanther, a law practice management software. Besides helping lawyers keep track of their billable hours, PracticePanther also helps organize documents and client information securely. When an associate is ready to finalize their billable hours, the solution even takes care of legal invoices, payments, and accounting.

4. Asana

If you’re going to be tracking billable hours, it helps to have a task management software or app that can organize your client to-do list. Asana is a great tool for teams looking to “organize, track, and manage their work.” Plus, Asana integrates with hundreds of apps to create a suite of business tools. The worst thing you can do for a client is to forget a project or miss a deadline. Asana keeps your task list straight, so you and your team can do the best work of your life.

5. QuickBooks

Tracking your billable hours is just one part of the equation. Once you record time, you need to get paid. QuickBooks makes it easy for solopreneurs and teams to invoice, track payments, and manage cash flow. Once you complete the project and your billable hours, you can feel confident that your books are in order.

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