Billable Hours vs Non-Billable Hours: How to Get Paid for Both

billable hours

Many industries bill their clients based on time, usually based on how many hours they worked. Ranging from law to advertising, several sectors of work use this form of charging a client. For example, you can’t’ bill for the time you spend on invoicing, marketing, and finding new clients. As stated in an annual survey by PR merger and acquisition consultancy Gould+Partners, PR firms improved their average hourly rates in 2018, compared to 2017. So, the utilization rate presents the number of hours an employee has been productive. If you believe that there are some unneeded non-billables, you can reduce them.

How are billable hours measured?

Calculating billable hours is straightforward: you take how much you've worked and multiply it by your hourly rate. But, the complications arise when you charge different fees to different clients, or when you have a diverse team doing differently paid work, and you need to factor in all those different rates.

For freelancers or business owners, non-billable hours will help you increase your profits and benefit your business. This post will explain billable and non-billable hours, why you should automate this process, and how you can track using Hubstaff. Whatever the case, registering time and keeping track of billable hours is paramount if you want to know what to expect from your projects in terms of timing and budgeting. Not to mention the regular daily activities like having lunch or taking a short break from work. Here is a list of tasks and activities that could get included in the average billable hours template. Both types of work are vital for running your small business or freelance operation, but it’s essential to understand how to balance your time between billable and non-billable hours.

What tasks are billable to clients?

Many firms expect attorneys to reach minimum billable hour requirements ranging between 1,700 and 2,300 hours per year. According to the 2021 Legal Trends Report, lawyers spend just 2.5 hours each workday on billable work. It’s clear that lawyers must find ways to track their hours as effectively and accurately as possible to reach their targets—without losing valuable time on the act of tracking. At the end of each billing cycle or when you complete a client’s project, review your time log and calculate your total billable hours for the project. Billable hours for a particular client or project may also be pooled. That can enable more effective use of human resources and less expense to the client.

What are examples of non-billable hours?

Non-billable hours are the work hours you spend which are not going to be directly charged to the client. Some examples of non-billable work hours are things such as team meetings, staff development/training, or networking and attending conferences.

Hubstaff includes a robust invoicing tool that enables you to create invoices that you can send directly to clients and record payments. Both billable and non-billable projects will count toward the total time recorded in your timesheets and reports. Similar to automation, outsourcing is handing off work to somebody else to do it for you. You probably have non-billable tasks you don’t like to do — or perhaps there are tasks that need to be done but aren’t the best use of your time. It can help to offload or outsource those activities that are draining to you and your team.

employee productivity tracking tools for large businesses

This way, you need to mark all your billable and non-billable activities. Now that we’ve learned why tracking non-billables is essential for your firm, let’s find out more about the average number of billable hours. Here are the main reasons why keeping track of your non-billable hours is significant for your company and your clients.

  • What’s more, you also get an overall overview of what you invoiced to your clients, what has already been paid, and what is still pending.
  • Clockify has a powerful integrated reporting system so you don’t have to count billable hours and add them up manually.
  • Every business operation has repetitive tasks, such as administrative work, that can consume a lot of your time and doesn’t directly contribute to the bottom line.
  • Generally, non-billable hours are the time you spend on any tasks unrelated to the client or their work.

This means you’ll save time, which translates into enhanced billable hours. This makes it possible for you to push up the total billable hours. There are software solutions that you can use to keep track of and automate non-billable hours. However, it’s possible to keep track and automate some tasks that consume much of your time or that of your employees. It will ensure faster management of projects by your team and drastically reduce the time spent on non-billable work. For activities within the category of non-billable hours, they’ll be charged to an organization’s account since there won’t be any compensation expected from a client.

Track all the billable hours

When you complete a project or at the end of each billing cycle, add up all your billable hours for each client. For example, if you are a lawyer at a firm, you may not necessarily be paid according to your billable hours. After you’ve divided your salary by the number of hours, increase this figure by a little to account for the time you may spend on non-billable tasks. You should factor in your lifestyle requirements and things like vacation, personal days, and emergencies.

  • SAVIOM also provides tools for project portfolio management, professional service automation, and workforce planning software.
  • In your law practice, there is nothing more valuable than your time.
  • These hours are critical for running the consulting business, supporting client projects, and maintaining internal operations.
  • With the correct view of every situation in the business, shifting priorities and setting guidelines for activities that include meetings, team activities, and training would be easier.
  • Other companies invoice their clients twice a month, based on the volume of work tasks.
  • The most obvious reason is that it helps you figure out how much to charge clients.
  • It’s time to collect your project timesheet data and calculate the total billable hours for the project/work.

Companies that track billable hours typically use an online timesheet system that makes it easy for employees to record the exact amount of time they spend working in a given week. One-click timers used within time tracking software make tracking your billable hours super easy. Accurately tracking billable hours is a common challenge for many businesses.

Without understanding how much non-billable work you have to do before you can even start working on billable activities, you can’t understand the real value of your time. When maximizing the number of billable hours an attorney has, it becomes necessary to increase the number of lawyer work hours worked overall. This means that some lawyers are working anywhere from 70 to 80 hours per week every week just to meet their billable hour minimums which can range between 1700 and 2300 hours a year. If an attorney worked 40 hours a week for 52 weeks of the year (NO weeks off) – they would work 2,080 hours a year.

  • The utilization rate calculates billable time as a percentage of an employee’s total working hours.
  • Let’s know the challenges of the billable hour model for managing the consulting business.
  • Stop goofing off during business hours and you may be amazed to see how much your billable hours increase.
  • Once you track your billable time in Hubstaff, you can access time reports and customize them according to week, team member, project, or client.
  • One of these reports is The 2017 Legal Trends Report, a survey done by Clio, which included around 3,000 legal professionals.
  • Policies, training, and incentives are often created to improve the utilization of billable hours.

To get paid for services, many agencies, software shops, and consulting companies turn to billable hours, and for good reasons. As they say, time is money, and billable hours are clearly the bridge from one to the other. Strategic decisions regarding who at a law firm is doing a task can boost profitability, and simultaneously pass savings onto clients. When new lawyers and law students ask and do the math on “How many billable hours in a year will I be expected to work?

You will get paid for what is worth without underselling your services. Tracking will help you know how much time you spent on a project and what tasks took up the most time. This will help you create better estimates for future projects, and reduce the chance of unhappy clients. You’ll also be able to identify which clients or projects use more of your time than others and adjust your rates accordingly. You might think you’re only spending five minutes on a task, but when you look at the clock, it’s been an hour!

billable hours

While filling individual consultant utilization spreadsheets, most consultants focus only on their billable work. As a result, the consultants ignore and deny the need for teamwork to increase their billable time, jeopardizing the consulting firm’s credibility. In addition, it provides insights into the financial health of the firm, allowing for accurate forecasting of revenue and budgeting for future projects. Moreover, organizations can identify areas where costs can be minimized, and additional resources may be needed. The amount of time spent on a job varies from each assignment and the number of tasks they require.

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