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Knowing the difference between billable vs. non-billable time can save you time and improve your billing accuracy.
When keeping track of time spent on each task is simple, your reports will be accurate, and creating invoices is a piece of cake.
This post will explain billable and non-billable hours, why you should automate this process, and how you can track billable hours using Hubstaff.
Billable hours are the hours spent working on client projects. Non-billable hours are any that are spent on administrative or overhead projects that are not directly related to client service.
For example, sending emails to clients would count as billable time. However, upgrading your email software wouldn’t count as directly servicing those accounts.
Calculating billable hours can help determine employee workloads and manage efficiency. If this process is new to you, here’s what you should know about billable vs. non-billable time.
The advantage of billing time to clients with set billing rates is that it gives your client a clear picture of how you spent your time and why it is worth their money. Tracking hours you’re billing also ensures you will be paid for any overtime hours worked.
Your client may ask that you to note what you’re billing for them. This provides further clarity for them, and while it can be more work for you, it is a way to demonstrate your process and progress to the client.
Here are some scenarios when you will need to use billable hours:
Sending invoices to a client
Preparing project estimates
Payroll for employees and freelancers
Budgeting future projects
Depending on your client agreements and internal policies, billable time may or may not need to be reported on a timesheet. Regardless, timesheets allow for simple billable hours tracking and ensure the accuracy of your billable hours estimate.
Non-billable hours are not a complete loss for your business. While clients may not pay for this time, it is still necessary.
Depending on your internal policies and agreements, getting up to refresh your coffee or chatting with your team during a Sprint meeting will not be billed to a client.
As an employee, don’t worry; your employer will still pay you for these hours. For freelancers or business owners, non-billable hours will help you increase your profits and benefit your business.
Now that you know the difference between billable and non-billable hours, you’re probably wondering, how often should I be doing work that isn’t billable?
There isn’t a straightforward answer, but we all know no one can be working on client projects for 8 hours a day (you’ve got to get a lunch break in your day!).
But how productive should you be in terms of client work, especially when you’ve got to pay the bills? Your expected billing rate depends on the industry and your client’s expectations.
On average, that typically means billing around 30 hours out of 40 working hours a week. For some high-performing fields, that number may be even higher.
According to the Yale Law School Career Development Office, “to be profitable to your firm, [legal professionals] must make enough money from your billable hours not only to cover your salary and overhead but also to generate revenue for the firm.
The most direct way to track your productivity using billable hours is to determine your utilization rate. You can evaluate your billable hours' utilization rate with this formula.
Depending on requirements, you may also need to consider the opposite — the issue of billable rate overrun. The overrun rate means you have exceeded the allotted hours a client has allowed for a project.
You will get used to balancing your billable hours over time. By automating your hourly time tracking, you may be able to increase your utilization rate and spend less time focusing on tracking your billable hours.
Tracking billable hours is necessary for specific projects and industries. Some industries that track billable hours are law firms, consultants, construction teams, creative teams, developers, cleaning companies, and landscaping teams.
Team members in these industries track hours during their workday and note which hours they can bill to clients. Specific billable tasks will depend heavily on the industry.
Here are some general examples of billable and non-billable activities during a team member’s workday.
Working on a client’s project — creating final products and deliverables
Project planning for future projects
Project revisions and related tasks
Creating presentations, spreadsheets, and documents for a project
Client communication (including phone calls and emails)
Meetings with clients
Internal meetings unrelated to client work
Time management and timekeeping
Meeting and pitching new clients before a contract is signed
Continuing education classes and time spent learning new skills
Marketing activities and promotional work
Corporate networking and employee development
Administrative tasks like office organization and bookkeeping
Internal meetings regarding clients
Invoicing and reporting
Travel time to client’s offices
Creating client contracts
Visiting other offices to work on the project (banks, client partners, loan offices, and studios)
If you are a freelancer or are new to billing time, you will need to specify which tasks you are allowed to bill to the client.
Clients or businesses should have specific policies regarding whether certain things like travel time will be billed or non-billed hours.
When you automate your time tracking process, your billing workflow will improve — a win-win for businesses and clients.
With manual time tracking and invoicing, mistakes are hard to avoid, and your profitability will inevitably take a hit. Not to mention, inaccurate time tracking impacts client trust and your company’s bottom line.
If you are a freelancer and you forget to bill hours, or if your team members get distracted and forget to bill their hours until the end of the day or the week, time may get lost.
Very few of us have a memory strong enough to sustain that kind of tracking. That’s why automating this process can save you time and ensure you’re billing clients for all the time you spend on their projects.
Hubstaff combines user-friendly time tracking with the functionality of detailed reports to provide all the tools you need to track and bill for your time.
Hubstaff’s time tracking software, payroll, invoicing, and time reporting can help you track billable and non-billable work. With Hubstaff, you can set your hourly rate and pricing, track billable hours precisely, and send invoices to clients automatically.
Both billable and non-billable projects will count toward the total time recorded in your timesheets and reports. These hours are all payable via manual and automatic payments.
Hubstaff allows for billable and non-billable hours tracking
Once you track your billable time in Hubstaff, you can access time reports and customize them according to week, team member, project, or client.
You will be able to filter reports, save them for future use, or send them directly to a client.
Hubstaff includes a robust invoicing tool that enables you to create invoices that you can send directly to clients and record payments.
Automating your billable and non-billable hours tracking can save you time and money. Spend time on more critical client-based tasks, and let a time tracking software do the administrative work.
With Hubstaff, tracking billable vs. non-billable time doesn’t have to be complicated. Using our time tracking software, you can automate your billing process and increase productivity.
Use Hubstaff to automate time tracking, invoicing, billing, and employee scheduling.