The Complete Guide to Increase Billable Hours Best practices how to calculate billable hours

billable hours example

This time, however, we will choose a random month for a calculation, as the equation will differ depending on the time period of choice. In our case, we will analyze the billable hours for September 2022. You calculate utilization by dividing the total hours worked during the year by billable time. To decide on your hourly rate, set a target for the annual salary you’d like to earn. Do some research and make sure your target salary is in line with what other businesses offering similar services earn.

What are non-billable items?

Non-Billable Items are secondary charges that students can expect to pay to attend the university. They include items like room, board, books and other indicentials.

It can help to offload or outsource those activities that are draining to you and your team. The most significant benefit of automation is that it frees up your time to focus on project-related tasks that you can bill your client. Automating tasks such as invoicing, payroll, and email marketing can allow you to grow your business while still focusing on the important decisions that move the needle. Whether you’re working as part of a team or have employees working for you, there are going to be times when many people, including your customers, are asking you for things. If you don’t know how to prioritize all of the inbound requests, you can quickly get overwhelmed and spend too much of your time on non-billable work. Keeping track of and optimizing your billable and non-billable hours doesn’t have to be another dreaded task on your ever-growing to-do list.

Should You Use Billable Hours?

For instance, if someone needs approval from you, or any additional data, they should include it in that list. No matter the type of your industry, be sure to accumulate enough billable hours because they’ll cover your non-billables. Ideally, you should have more billable than non-billable hours.

You can then generate reports based on the period and data you want to analyze or view. Luckily, there are many tips and tools to make tracking your billable and non-billable hours easy so you can spend more of your time on the critical parts of your job. The concept of billable versus non-billable hours is widely used in the legal profession. In fact, many law firms require that their attorneys track their time throughout the work day so that all billable and non-billable times can be accurately recorded. To make sure you don’t overlook any of your billable hours, track them in real time. If you track time as it happens, you won’t overlook any billable time.

Billable vs Non-Billable Hours

In small companies, managing billable hours may be done on paper or in Excel spreadsheets. That is why the majority of businesses use an automated time tracking tool for the purpose. For example, if you work 2,080 hours during the year, and 1,900 of those hours are billable, your utilization rate is 91.3%. Measuring utilization rates can help you benchmark employees performance and increase profitability.

billable hours example

It requires careful attention to detail and precision to avoid costly errors that could impact your income. Now that we’ve gone over how to calculate billable hours, let’s move on and discuss how to track them. If the client has any questions, you can share the data so they can double-check to verify that the billable hours are accurate. A timesheet is a popular visual tool for showing how each hour is being used. Timesheets are tracked manually, typically using a spreadsheet like Excel, but can also be done with pen and paper.

Decide on the base hourly rate

💡Another way to calculate billable hours is by using Clockify. 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. The amount of time spent on a job varies from each assignment and the number of tasks they require.

Our guide will help you spot project bottlenecks before they start to cost you. Clicking on a task will allow you to change the number of hours, choose a different project or task name, and add relevant notes. Then you can consolidate all the information into a single timesheet at the end of every day, week, or month. Prior to that, Arkadiusz was at the helm of his own software development company where he oversaw operations. A great enthusiast of process improvements, his personal mission is to make software companies more profitable and efficient on their path to growth.

Resources for Your Growing Business

This professional document should include the services you’ve rendered and other particulars to the business and payment. For example, the total number of hours in an eight-hour work week approximately adds up to 40 hours. A billable hour may not cover every administrative task on your daily to-do lists.

  • But how productive should you be in terms of client work, especially when you’ve got to pay the bills?
  • Let’s get into more details on some of the benefits of tracking billable hours.
  • A digital time tracker or manager is designed to record your working hours.
  • In this situation, you would pay someone a fixed amount every month in exchange for a certain number of hours of work.
  • For projects, list down the hours spent on each task – so you have an idea of what the client is paying for.

For example, Forecast is an all-in-one tool you can use for project management, invoicing, time tracking, and administrative work. With its invoicing feature, you can save time by generating invoices within a few clicks and easily tracking all payments after sending the invoices. 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. Having tracked billable hours once, you will have the needed information to figure out how much time your team needs to deliver certain tasks and projects. A billable hours chart will help project managers, clients, and yourself to how many billable hours in a year were used in a particular project. A time tracking system with a billable hours calculator will help you to efficiently track billable hours and ensure you get paid as you should.

According to Yale Law School, for a law firm, the target billable hours is usually between 1,700 and 2,300 hours per year. For accounting firms, the billable hours expectations usually run somewhere between 1,700 and 2,000 hours per year. The more billable hours you work, the more revenue you can generate for your business. Let’s say that there’s a consultant who bills 60 hours to clients per week (total billable hours). If there are 40 working hours in a week (total hours available), we’ll divide 60 hours by 40 hours. As for the worker, business or freelancer, billable hours mean that they have more flexibility in setting their work schedule.

Thus, this can seem like a lot, considering that a full-time worker typically works about 40 in a week. 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. This can be an issue for the client, unless the project is closely monitored and safeguards are in place.

How to increase billable hours

Send it to the client ASAP or have it sent automatically with an automated invoicing tool. 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.

  • Equally important is how much of these resources are utilized in creating deliverables.
  • It is best to track working hours by project separately, even if the different projects belong to one client.
  • As such, billable hours must be included in the invoice – a document that serves as an agreement between the buyer and the seller (of products or services).
  • Use this chart to ensure you bill the minutes you spend on work with a percentage of the set hourly fee.

With PSOhub, billable hours are tracked for you with included invoice management. Once your contract is entered in PSOhub, you can select your resources and get started on tracking time toward the project straight away. To invoice billable hours, you should keep accurate track of the time spent doing a client’s work.

Fixed price projects

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. The difficulty for the company, in that case, is feeding the people who could work for that long, with the skills required to complete the project. However, bear in mind that the value may vary depending on the local public holidays and working days for your company.

billable hours example

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