To ensure revenue and financial security, every business owner and independent contractor should be able to calculate billable hours. Time is money, especially when it comes to the number of billable hours a freelancer or business owner may rack up in a calendar year. Thus a billable hours chart can be helpful for your business.

For their businesses to succeed and keep customers, professional services teams must strike a balance between several factors. Teams must complete tasks on schedule and within budget while still generating revenue for their company. Profitability falls if a business doesn’t have a reliable system to monitor time, projects, and billable hours.

What are Billable Hours?

Most of the hours spent working on projects that are directly connected to your customer are considered billable hours.

Because people in many professions bill for their labor, the word “billable hours” can occasionally be unclear. For instance, it might be claimed that freelancers and building contractors put in roughly the same number of billable hours each day.

However, it is not the same thing. Billable hours requirements are unique to a very small number of sectors.

A customer is billed for these billable hours at the agreed-upon hourly rate. They represent the maximum number of hours that a business can bill its customers for doing services on their behalf.

The majority of service-based businesses, including digital agencies, accounting firms, law firms, and consulting firms, bill their customers using billable hours. They can determine how much time employees spend on tasks that generate income by understanding billable hours.

Some of the common industries using total billable hours are as follows.

  • Law firms
  • Accounting firms
  • Tax consultancies
  • IT firms
  • Construction firms
  • Real estate agencies
  • Architecture studios
  • Engineering firms
  • Human resource management companies
  • Recruitment agencies

What qualifies as client-related tasks to meet billable hours targets may differ from business to business. These are some of the primary job requirements that small companies and independent contractors should consider billable.

  • Real efforts to finish the job
  • Project management
  • Creating project schedules
  • Investigating client issues
  • Being present in meetings about a client’s case
  • Examining and answering emails related to client business
  • Revision of work delivered to the client upon request

What are Non-Billable Hours?

Any work completed that isn’t charged to clients is considered non-billable hours. Non-billable hours are necessary for businesses to maintain efficient internal operations, and if they are well handled, they may positively impact corporate culture.

On the other hand, non-billable hours are frequently used for tasks that help your company as a whole rather than just one particular client. Employee training, participating in brainstorming sessions unrelated to client assignments, and working on your own business’ marketing and advertising initiatives are all commonly seen as non-billable activities.

Non-billable hours might consist of:

  • Prospecting, marketing, and other business development activities.
  • Meetings with coworkers or employees that don’t always include working with clients.
  • Gaining new abilities via training.
  • Regular administrative duties.
  • Payroll and hiring activities.
  • Meetings before contract creation.
  • General communication about responsibilities relevant to the job.
  • Making client proposals and schedules.
  • Presenting concepts and haggling with prospective clients.
  • Participating in gatherings or activities for education, networking, information exchange, or team development.
  • Creating business aims and goals.

Difference Between Billable and Non-Billable Hours

There is a lot of significance in maintaining a record of our total billable hours. But how can we properly distinguish between our billable and non-billable hours given our hectic work schedules?

Billable Hours Non-Billable Hours
It’s billable if you’re working for a customer that pays you by the hour. It’s not billable if you are working on activities that are not particular to the customer.
Billable non-recovered costs eat away at the company’s profitability. Non-billable hours costs are not a part of revenue gained from customers.
Billable hours target the tasks performed for a specific client for which the business will be paid. You can also use time-tracking software for billable hours. Non-billable hours detail tasks required to keep the business working in the background.
Example: The activities of attorney billable hours chart performed while working on a genuine case for a client are included in billable hours. Example: Activities that must be completed but aren’t directly related to a case, such as administrative tasks, are included in non-billable hours.

How to Calculate Billable Hours?

It’s simple to figure out how many billable hours you’ve worked; simply multiply your time spent by your hourly rate. But when you have a diversified team working on projects that are paid differently and you need to take into account all those different rates, issues start to surface.

1. Setting Up an Hourly Billable Rate

Here are some questions you should ask yourself before starting a project or employing someone: What should you pay your employees? What will you charge your customers?

Using the breakdown of your anticipated annual revenue can help you determine your hourly rate. To make sure your predicted salary is within the range of what others in your profession make, you may conduct some research. Next, divide your estimated annual income by the number of hours worked.

The rate you obtain after dividing your annual profits by working billable hours should be somewhat increased. This lets you take into consideration the time you spend on administrative work and other non-billable activities like billing.

However, you may also increase this hourly rate in increments to take into account:

  • Equipment expenses involved.
  • The percentage of resources used for client development.
  • Unchargeable jobs like holding meetings with a potential client.
  • Paid vacation days and other perks for internal staff, etc.

2. Choose an Appropriate Invoicing Schedule

You must choose when you want to send out bills after deciding on the fees for your professional services. The majority of small firms follow a monthly billing plan, sending out all of their bills at the end of each month.

3. Monitor Your Work Hours

To report to the customer and charge them for the job, you should next keep track of the number of total hours spent on it. You may keep track of your non-billable time to determine how much work tasks are not being compensated for on the project and where your business is using its important time.

You can manage your workload, eliminate any project management bottlenecks, and have access to several additional advantages by tracking the time of all your working hours.

4. Add up all of the Hours Worked

You should total up all of your clients’ work hours at the end of your billing cycle. A detailed list of the activities included in each project, together with the time spent on each activity, is ideal. It guarantees openness and makes it easier for your client to understand their return on investment (ROI) from working with you.

5. Create a Thorough Invoice for each Client

To submit to your client, you must construct a thorough invoice. Some of the details often included in a top-notch detailed invoice:

  • Contact information for your company, including the phone number, email address, workplace address, etc.
  • Contact details for the client.
  • A list of the duties for the pay period.
  • Billable hours for each assignment.
  • The payment deadline.
  • Conditions and terms.
  • The full sum that must be paid

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How to Keep Track of Billable Hours to Increase Profitability?

Productivity is essential for a business to help you make the most of your time, optimize your billable hours, and guarantee your profitability. The following are some essential measures you may take to increase your team’s productivity along with your billable hours:

  • Use time tracking software to precisely measure the amount of time spent on jobs and projects and charge clients appropriately.
  • Establishing an organization-wide time monitoring policy.
  • Locating mundane jobs and billable hours with lower rates, then assigning them to support employees. Always put more of an emphasis on giving employees who are working on high-value projects higher-rate billable hours.

How to Increase Billable Hours?

Small firms and independent contractors that want to boost their revenues need to undoubtedly try to increase their billable hours. You may increase your billable hours and make more money by following these suggestions:

1. Establish Billable Hours Goals

The more billable hours you put in, the more money your company can make. Establish billable hour goals for you and your staff, and think about rewarding those who reach their goals with incentives. Your industry and business are important considerations.

To get enough billable hours, it is common to practice in the legal industry and public accounting to demand staff to put in long hours of overtime while allocating non-billable time to administrative duties.

2. Follow in Actual Time

Tracking your billable hours in real-time can help you to ensure that none of them are missed. Instead of going back at the end of the day and attempting to total up all the billable hours you spent on a client’s project, note your start and end timings for each project as they occur. You won’t forget any billable time if you keep track of the time as it passes.

3. Keep Track of your Non-Billable Hours

You’ll be able to review your workday and see areas where you can be more productive if you’re keeping track of how many billable hours you have spent working. You need to also track your billable hours’ targets.

You could also want to spend money on accounting software that enables you to automate the invoicing process if you find yourself spending a lot of time doing it.

You track billable hours or your utilization rate the portion of your total working hours that you spend on work tasks that can be charged to a client to track the time of both billable and non-billable hours.

By dividing the number of total hours worked over the year by billable time, use is determined.


It doesn’t have to be difficult to track billable hours. You can really benefit from it by making a few little changes to your work habits and creating a defined billing procedure.
But simply coming up with a method to keep track of your billable hours is insufficient.

Your ability to manage your company’s internal and external connections can help you manage projects, total hours, and tiresome administrative tasks more efficiently and increase profitability.

Any firm may benefit from understanding billable hours and non-billable hours calculations. No matter if you do it alone or with the help of a billable hours tracker to take the burden off your shoulders. Your invoicing statistics will improve with this sort of careful time-tracking method.

You need a tool to help keep track of your billable and non-billable hours too! Additionally, it strengthens your company’s credibility since accurate timekeeping enables you to produce flawlessly accurate bills, has an efficient billing process, and maintains open lines of communication with your clients.

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