Billable vs Non-Billable Hours: Meaning, Differences & Strategies

Also, itemize the billable hours with respective tasks to clarify how these were spent. To speed up the billing process, experts recommend using project time tracking software. One such service is Avaza, which provides accurate data that businesses can use to bill clients for the services provided. By focusing on billable hours, companies can increase their revenue by monetizing the time spent directly on client projects—for example, project work, client meetings, or service delivery. Billability is a critical metric representing the amount of work an employee does that can be directly billed to clients. It includes time spent on revenue-generating activities such as project work, client meetings, research, etc., compared to non-billable work such as BAU and administrative tasks.

• Or, if you’re spending a lot of time invoicing, you may want to invest in accounting software that allows you to automate the invoicing and billing process.
• For example, if a business incurs travel expenses while working on a client project, such as airfare, lodging, and transportation.
• It’s a great fit for freelancers and small teams who want to keep finances and billing under one roof.
• We used to have a project management tool, a time tracking tool, a support tool, a way we handled opportunities and sales-driven processes.

Why you should calculate billable hours

Professional service agencies calculate billable hours to invoice clients for creative and strategic services. Lawyers rely on billable hours to charge clients for legal services, like research, meetings, and court appearances. With a time tracking tool like Toggl Track, setting up projects, tasks, budgets, and billable rates is simplified.

• When it comes to money related stuff, Avaza’s business reporting makes it simple.
• It’s easy to forget to record your daily project-related and billable tasks.
• Tracking billable hours helps you provide accurate invoicing and effectively manage your internal work systems.
• It helps in breaking down complex projects into manageable tasks, organizing work, setting milestones, and mapping dependencies.

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• Tracking both types of work hours helps you uncover employee utilization rates, get insights into overall profitability, and understand the true business costs.
• Tracking your billable hours by the project will also help you determine your most profitable clients.
• Human error can consume many of those hours which not only wastes time but can lead to even more extensive and costly problems.
• This approach will help increase billable hours and improve resource utilization levels.
• Another alternative is value-based pricing, where the fee is based on the perceived value of the outcome to the client.
• He is the founder of Meaningful, a growth consultancy, and the creator of Supervisible, the resource and financial planning tool for agencies.
• Another helpful strategy is to outsource non-billable activities, particularly low-priority administrative tasks.

Once you have added the billable hours, multiply it by the agreed-upon hourly rate for individual clients. There are several ways to track billable and non-billable hours, such as by using paper-based timesheets or balance sheet spreadsheets. However, such timesheets are prone to errors, and the missed or double entries can result in underbilling or overbilling the client, leading to conflicts over billing.

Track In Real Time

A law firm working on a corporate contract negotiation bills clients for research, document drafting, legal consultations, and court appearances. For example, if an attorney spends 3 hours researching case law, 5 hours drafting the contract, and 2 hours in client meetings, all 10 hours are included in the final invoice. In most cases, someone would work eight billable hours in a day, as an 8-hour day is standard in most industries. However, your company may choose to work longer days and may bill clients at standard or overtime rates for the extra time. The more billable hours you work, the more revenue you can generate for your business. Tracking your billable hours gives you a clear overview of how time is spent on each project.

Tracking billable hours against the revenue generated helps companies assess the profitability of different projects or clients. In addition, it provides insights into the firm’s financial health, allowing for accurate revenue forecasting and budgeting for future Foreign Currency Translation projects. Moreover, firms can identify areas where costs can be minimized, and additional resources may be needed. Differentiating between billable and non-billable hours is crucial for accurate time tracking. Lawyers typically bill in six-minute increments due to practical considerations.

Fair pricing benefits everyone—it sets expectations, builds trust, and ensures you get paid for the value you provide. Clear contracts and scopes of work make it easier to stick to what’s billable and avoid scope creep. Download our whitepaper Decoding the World of E-Billing for a detailed explanation on when to use LOC and LEDES billing, and more.

Firms may also offer resources, such as support staff or software tools, to assist with administrative duties, ultimately allowing attorneys and paralegals to focus on billable work. Increasing billable time involves optimizing work habits, minimizing distractions, and reducing non-billable activities. For legal professionals, understanding and consistently meeting or exceeding these requirements is key to career growth within their firm. Time management skills are essential for every profession, but they rise to a new level of importance when you are also held accountable for meeting a billable hour goal as a paralegal. If you are a paralegal and need some tips, here are 3 Pro Tips for Paralegal Time Management.