What Are Billable Hours? Setting Your Billable Rates

Billable hours

It is the very stage where you get to define all the timelines, set milestones, name and describe tasks that will get you closer to the project finish line. Depending on the size of the project, this stage can take from a few hours to a few days, which is why it deserves a place on every billable hours chart. QuickBooks makes it easy for solopreneurs and teams to invoice, track payments, and manage cash flow. Once you complete the project and your billable hours, you can feel confident that your books are in order. Whether you’re a business owner or an employee, not every task constitutes billable hours. Generally, non-billable hours are the time you spend on any tasks unrelated to the client or their work.

On the other hand, consultants working on fixed rates are not motivated to go the extra mile to achieve perfection. Instead, they settle for an average quality of work, just sufficient to maintain their relationship with the client. For example, if you spend too much time taking care of administrative tasks, it would be prudent to hire another person to do them. This will give you sufficient time to focus on the core issues of your current project. There, for example, the creation of a list of potential customers can be obtained without collecting it manually, but by installing a high-quality email finder tool for lead generation. You might want to look at how long you take to do low-value tasks or the time spent procrastinating on tasks.

A billable expense income is an addition to a customer’s invoice not based on time. Instead, this is the money they pay to cover any extra expenses that may have accumulated on their behalf during the project. When working as a freelancer, the product does not always necessarily reflect the number of hours put into a project. Often, there is a level of research done to construct meaningful and practical creations.

Timeular for teams

They have to practice effective communication, constructing recommendations, and may even conduct research. Due to the wide range of work they may have to undertake while on the job, it is best to charge clients based on the working hours dedicated to their project. Because of the cost difference, the first choice for any organization is always to use its internal workforce over a consulting resource. However, lacking the necessary skill sets and tight project deadlines may force them to lose sight of the consulting option.

  • It’s important that law firms devise effective strategies for getting the most out of their billable hours while helping both lawyers and their clients understand just how law firms bill.
  • Consulting firms charge clients for billable work; hence, the more chargeable hours, the higher the cash flow.
  • Nevertheless, the total of billable hours you have in a day is the sum of hours worked that can be charged to a client or customer.
  • 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.
  • When you work on something, use the work hours timer to measure how long you’ve worked.

This means there will be an increase in billable time and a reduction in non-billable ones. 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. For example, if the project is estimated to last a month and exactly 1080 hours, the invoice at the end of the month will have this exact number on it.

Businesses, agencies, entrepreneurs and freelancers all frequently use billable hours to charge clients for the services they provide. To charge by billable hour, workers need to track the amount of time they spend on each client’s projects every day. If you’re going to be tracking billable hours, it helps to have a task management software or app that can organize your client to-do list. Asana is a great tool for teams looking to “organize, track, and manage their work.” Plus, Asana integrates with hundreds of apps to create a suite of business tools. The worst thing you can do for a client is to forget a project or miss a deadline. Asana keeps your task list straight, so you and your team can do the best work of your life.

How many billable hours are there in a day?

Master law office management with our ultimate guide including best practices for leveraging the technology to save your time and manage law firm effectively. Setting a real-time tracker is better than logging hours manually. This method will help you identify who is approaching the work in a way that is too laid back, and those who work overtime and put in too many hours.

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. Lawyers trying to increase their billable hours may behave in ways that are not in the interests of the client. Although policies for billable hours vary from one company to another, the idea is that the client is only charged for time that the employee is performing work for them. So, for example, breaks, personal time, vacation time and meetings about unrelated matters are not billable. Some things, like attending to correspondence and talking to co-workers are harder to either include or exclude.

Why you should calculate billable hours

This software not only helps offices keep track of billable hours, but also makes other useful tasks easier, like productivity analysis, costing, reports, invoicing, and accounting. Record your billable hours by project, so you know what client you’ll invoice for the work you’re completing. It will also help you track how much time you’re spending on each client’s project per billing cycle.

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It is not measurable even if junior staff puts in more effort than experienced hires. Their pay scale and billable hours in the appraisal period would still be significantly lower than that of more qualified counterparts. With unequal pay and stressful juggling between several projects, work-life balance is challenging in consulting firms leading to a higher attrition rate. This is how the chart can help organizations effectively track billable hours. Let’s know the challenges of the billable hour model for managing the consulting business. A billable hour chart is a template many consultants use to calculate the time spent on a specific task or project for billing purposes.

How many working hours should be billable?

To stay organized, track track how many billable hours are spent on each project. When invoicing comes around, an organized log categorized by the patron is your best friend. If not explicitly expressed in the contract, then the worker has the power to work for as long as they want, with no cap on their fees. Sometimes a service provider may argue against a cap, claiming that they do not know how long a project is going to take.

Billable hours

There are several steps to this process, from setting up accounts and permissions to running reports, so take a look below to see how it’s all done. When combined, each of these factors plays a role in the future success of your business and ensuring it remains profitable. Additionally, you will know how long each person would take to complete a task or a project. Some admin-related tasks can be repetitive and can slow down your workflow. It may make sense to outsource a non-billable activity or two by hiring an employee. You can choose from a wide pool of competent virtual assistants to match your requirements and budget.

Billable and non-billable hours basics

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. In pragmatic terms, those hours mean that your team makes less money for the company, while for your clients it means that projects might take a little longer than they otherwise would.

Billable hours

Instead, they are assigned to the ones which generate additional cash flow. These qualities make consultants a better choice for organizations, but their billable time comes at a hefty price tag. The chargeable hours of consultants cost more than those of the employees of that firm. Then why do organizations have to hire consultants despite their expensive billable hours? It is because the organization needs external support to achieve its business objectives, which otherwise isn’t possible with its existing workforce.

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Various forms of technology have been developed to track the billable hours generated by employees. The findings of the 2020’s SPI research show that typically, time and materials-based projects produce the best margins as long as bill rates are set appropriately. Look at IT Consultancies that produced the best time and materials margins at 38.7%, compared to 36.9% achieved with fixed price models. And couple it with the fact that by tracking billable hours, you can monitor everyone’s productivity and contribution to the business as well as see where exactly the demand for work is. When billable hours are properly tracked, consulting firms can ensure that they are not missing out on any potential revenue opportunities.

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It is essentially the time your client will be charged for –the work specifically being done for them. As we just mentioned, there are many strategies you can start implementing to increase your billable hours; however, tracking your time is one of the most powerful tools to do it efficiently. It also depends on your motivation to rack up a consistent amount of time per day. To track your percentage, take the number of billable hours and divide it by the time you spent working.

Billable hours

You can use cloud-based time tracking solutions that allow you to track your Billable hours easily. It’s as simple as starting the timer and stopping it when you’re done. In conclusion, understanding billable and non-billable hours is crucial for businesses to track all hours worked and create accurate invoices precisely. 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.