The Importance of Calculating Billable Hours and How to Do It Right.

While there isn’t a set precedent for how much time should be spent on non-billable hours, there are a few things to consider.

For one, it largely depends on the kind of business you run. While a cleaning company may only spend a few hours on the job, they’re normally charging a flat rate to their clients while a law firm might charge by the hour. A company with numerous remote employees or clients might have more admin work — figuring out payroll and invoices — while a more automated company might spend significantly less time doing that.

What you should consider with non-billable hours is how much they’re worth to your business. If there’s a lot of training involved with what you do, then those hours should be given more importance. However, if your company works off the old “time is money” adage, then maybe you should find ways to cut down on non-billable hours.

It has less to do with your industry, and more to do with your company itself. When trying to figure that out, look at how much non-billable time you currently use and see if that is providing a benefit to your company or not.

Obviously, both billable and non-billable hours are essential. But, should they be separate affairs?

The short answer is yes.

If you keep billable and non-billable hours on the same timesheet, you run into several issues. For one, you can’t bill your clients accurately if you’re not separating all your hours up.

On one side, your client won’t be very pleased if they find out you’re billing them for the hour your team spent watching a guy on YouTube eat a 30-foot burrito. Similarly, you won’t be happy if you can’t accurately bill them for the work you did because you didn’t track it accurately.

The simple solution to this is to track your hours.

One of the best ways to track your team’s hours (we think) is with Hubstaff. Our robust time tracking app makes it easy to track time, activity, and progress on projects all in one place.

Hubstaff can also be used to calculate billable hours. Here’s how:

Inside Hubstaff, you can set up individual projects based on your unique clients. If you’ve been using Hubstaff, then you’ve probably already done this. But, if you’re new to our platform, then you can easily do that in your projects tab.

Hubstaff makes it easy to set up billable rates for each of your team members. By doing this, you can fully customize what each team member accrues based on the projects or clients that they’re working on.

Once you’ve got your projects and rates set up, the next thing to do is get down to business. Have each of your employees track their time using our desktop, web, or mobile apps. Make sure, depending on the project they’re currently working on, that your team is tracking their time towards the correct task. This is extremely easy to do, but if you’d like to learn more about it, check out our guide to time tracking.

While your team is cracking away at their tasks, make sure they’re not going overboard by setting budget limits. You can do this in the projects tab in Hubstaff. By setting a project’s budget limit, you can make sure that the appropriate amount of time is being spent on any given project based on what you’ve quoted your client or how much money you’ve allocated towards that task.

After the workweek is over, you’ll get a notification in your inbox that it’s time to pay your team members for all their hard work. All you have to do is accept their hours worked and they’ll automatically be paid based on the bill rate you set up before.

Once it’s time to send the client the bill, all you have to do is head over to your invoices tab within Hubstaff. Find the client you’d like to send the invoice to, and Hubstaff will automatically calculate the line items based on the work your team has done for them. Then, all you have to do is send them the invoice, simple as that.

As a freelancer, you typically have several on-going projects you’re working on at once. Making sure you’re tracking your billable hours accurately means you’ll be able to bill your clients appropriately. Additionally, by seeing how many non-billable hours you accrue each week, you can better estimate how much bandwidth you might have for starting new projects or taking on new clients.

Lawyers, like freelancers, typically have a large number of clients that they’re juggling at once. However, unlike freelancers, some law firms require that their team members meet a minimum number of billable hours each year. Sometimes their bonuses are even based on their hours logged per year. So, as you can imagine, keeping track of your hours as a lawyer is extremely important.

Similar to lawyers, consultants work with a large body of clients and have to keep a detailed log of hours to make sure that they’re billing everyone correctly. Additionally, not every client will have the same bill rate, meaning that having an intuitive way of keeping track of those hours is extremely important. Unless, of course, you like to be confused and flustered a lot. Then, by all means, go for it.

If you run a company like a landscaping or delivery business, you and your team members are often on-the-go. This can mean that it’s sometimes hard to keep track of who’s working, how long they’ve worked for, and when they worked. By tracking everyone’s billable time accurately, you can better bill your clients for the work they need to be done. This can keep things organized and help avoid time theft. Additionally, by keeping a log of these hours, you can see if you need to start increasing rates or cut down on any non-billable time.