Billable hours vs Non-billable hours vs. Hours worked

If a professional cannot keep accurate records of their work hours, this can lead to billing complications. If a client disputes their bill, it may be difficult to prove that the professional worked the hours they claimed they did. Being able to bill clients on an hour-by-hour basis provides tremendous flexibility for businesses.

This means the payment depends on how these hours are kept track of, and how an appropriate bill is applied. By managing billable and non-billable time accurately, businesses can cover more non-billable hours, and negate some of these uncomfortable situations. According to DrewMcLellan of the Agency Management Insitute, the gold standard for most agencies is that 75% of your available hours should be spent on billable tasks. If you track only billable time, you only have your eye on recording immediate revenue. Instead of monitoring only part of your work, empower your team to be more efficient, profitable, and effective. Track your non-billable hours for a holistic oversight of all activity, task visibility, and high accountability.

Calculating your billable hour’s percentage

The amount charged to clients has to be adequate to cover the employee’s salary and other business expenses. Calculating an appropriate rate is essential, particularly for companies that depend on income from clients for most or all of their revenue. Typically, employees are expected to have billable hours equivalent to at least three times their salaries. Billable hours are the amounts of an employee’s work time that can be charged to a client. Employers charge clients at sometimes varying rates for different employees.

• To calculate billable hours or Time tracking, ensure you are on the same page with your client regarding the billing rate.
• They must be specific in how much time they spend working to receive an appropriate income.
• To figure out how productive your employees are, you can compare their billable and non-billable hours.
• This professional document should include the services you’ve rendered and other particulars to the business and payment.
• This includes anything related to the task at hand — from answering a quick phone call to sending out a work email.

Non-billable is time spent related to work in general but which does not contribute to a specific project. A client should not have to pay for something that does not directly involve their case, product, or service. General administrative tasks, networking, or furthering your education in the field do not count as billable time. 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-hour tasks

Doing effective billable hours accounting will help you figure out how much time, funding, and other resources were required for a specific project or collaboration. Instead of struggling with ballpark numbers, you get specific data that will help you make fast and effective decisions when planning future projects and selecting clients to work with. While the ideas of what is billable and what isn’t vary from business to business, and project to project, the idea behind them is basically the same. You need to make sure that you are only charging for work performed and not for personal time spent on non-related tasks. You can use cloud-based time tracking solutions that allow you to track your billable hours easily.

Generally, if you can tie your work back to the client, your time is billable. As a business, you’re responsible for your staff, and that means covering days off (vacation or sick leave) and their salary, regardless if their time was marked as billable or not. The type of tasks that fall into the billable bucket will vary from business to business. Become more efficient https://www.bookstime.com/articles/billable-hours with quick reports for performance tracking and a zero-surveillance policy to encourage accountability within your team. Become more efficient with quick reports for performance tracking and a zero-surveillance policy toencourage accountability within your team. Make better decisions for your business by tracking and analyzing your financial data and trends.

How can you reduce your non-billable hours?

If you are still looking for the best way to track billable hours, you don’t want to miss Forecast’s massive Utilization report either. It automatically tallies up your billable hours from the timesheets, calculates utilization rates as well as tracks hours spent on non-billable work. The only thing you need to do to get this data is https://www.bookstime.com/ to make time registrations a staple in your routine. A digital time tracker or manager is designed to record your working hours. It helps to simplify billing clients and provides data to support your invoicing. Such tools are ideal if you offer legal services or other work where keeping accurate records of billable hours is crucial.

• Maintaining a template to track your billable hours accurately is also a useful idea.
• Lawyers can track billable hours with a billable hours chart, which will save them the time, effort, and frustration of calculating the hours manually.
• But knowing how to keep track of billable time can be a tricky business.
• This post will explain billable and non-billable hours, why you should automate this process, and how you can track billable hours using Hubstaff.
• For their businesses to succeed and keep customers, professional services teams must strike a balance between several factors.

When you complete a project or at the end of each billing cycle, add up all your billable hours for each client. In some companies, billable hours are also used to monitor monthly project cash flow and budgets. Billable hours help you track the number of hours spent on any given task or project each working day. With manual time tracking and invoicing, mistakes are hard to avoid, and your profitability will inevitably take a hit.

The utilization rate for law firms and legal professionals

Besides, your employees will get all the necessary information, which means more hours working on the project, less time spent on non-billable activities. Remember, non-billable hours are equally important as billable hours. Think of non-billable hours as a photo frame and billable hours as a photo itself. It takes a lot of time to find the right angle and lighting to take a perfect photo. But, at the end of the day, it’s the frame that’s holding that photo and making it visible to others.

Assuming you work in a profession where billable hours are common, there are a few different ways to track your hours. Non-billable hours consume your budget, lowering profits and overloading your team with work. Billable hours are necessary because they directly impact your bottom line.

Time Tracking

Companies track billable hours to ensure the time spent on a project or task can be justified. Tracking time ensures a team’s working hours are adequately compensated and that the billable time is paid for. Even though you might only be directly paid for your billable time, it’s essential to track all working hours. Tracking billable and non-billable hours will help you clarify how your time is spent throughout the work week so that you can identify where improvements can be made. Without knowing how every hour is being used, you can easily overlook where time is being wasted and how to optimize some of your business processes.

By knowing exactly which tasks constitute billable hours and how to keep track, you’ll be ready and set to optimize everything from workflows to invoicing. Excel has a template specifically designed for managing your billable hours. You can input hours worked and pay rate for each client on any given work day, with time-in, time-out tracking.