What Are Billable Hours? Time Tracking Tips To Get You Paid

calculating billable hours

Then, when November comes around, you realize there are not enough available work hours to be able to meet or exceed their billable hour goal for the year. Or maybe you know that work typically slows down around the holidays. Time for work spent performing a service should be reported in tenths of an hour. Compensation is calculated by multiplying the applicable rate per hour by the total number of hours. Calculate totals for each service category separately, and enter the category and grand totals on the appropriate lines on the voucher form. Historical timesheet data from previous projects can make it much easier to provide accurate estimates when you bid for new business, or when you have ongoing projects with changing scopes.

In case a certain client continues to be less profitable, it is probably time to think about the future of the relationship. Your firm relies billable hours on getting paid and paid quickly to stay afloat. A clean, concise, and consistent billing process is the way to ensure that happens.

What are Considered Billable Hours?

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.

It can help identify opportunities to reduce time spent on non-billable work and improve overall efficiency––which is precisely what Sweat Co+ did. How do the Bean Counters measure that 8 hours which is not even billable?

Calculating your billable hour’s percentage

In the reports dashboard, you can easily view each project and client’s total and billable/non-billable hours. You’re absolutely right in that using billable utilization as the sole, one-dimensional metric to run the business can be counterproductive. In fact, under the “What’s on the Top” section, we argue for a more nuanced view of utilization instead of or in addition to simple billable utilization. The numerator of the utilization calculation is driven by what behavior you want to encourage. Most services organizations take a very simplistic view and just measure billable utilization…time spent working on billable projects. While you can use manual methods to track and calculate billable hours, they can be inaccurate and unreliable.

  • It takes a few seconds to switch your timer to a different task and drastically improve the accuracy of your billable hours.
  • We’ve got a chart below that will give you the shorthand on how to divide your hour.
  • This can help you better quote clients in the future and possibly help you balance the time spent on certain types of work to foster growth.
  • Hourly rates differ from one industry to another as in the case of a law firm.
  • When you spend time and resources training workers so that they can handle the project effectively, is a non-billable time that clients need to know about so that they can pay for it.

With an integrated mobile application, your lawyers will be able to track inbound and outbound calls with clients. These calls are tracked and automatically recorded as billable events, and your firm’s attorneys can also automatically capture text messages as billable events. Automation removes the hurdle of remembrance and gives your lawyer’s more time to focus on getting work done. If you know the hourly costs of your business, you can for sure estimate your hourly rates; this meansyou can calculate your profitability. The first tip that we would like to share with you is to keep track of the hours worked every single time.

Keep a Track of Non-billable Hours

Next, you’ll need to create a time log to track your billable hours by client. You can do that manually, by setting up a spreadsheet with separate columns for the client name, a description of the work performed, the date and the time spent working on the project. Because developing a manual time log can be cumbersome, you can also track your billable hours digitally.

  • I do like where you’re going with thinking about how Theory of Constraints and Lean apply to the world of professional services.
  • A non-billable task, like following up with a potential client.
  • A digital time tracker can help you record all your working hours.
  • But the line between billable and non-billable hours can sometimes get very blurry.

Record your start and end times for each project as they happen, rather than looking back at the end of the day and trying to add up all the time you spent on a client’s project. If you track your hours as they happen, you won’t overlook any billable time. There are a few reasons why tracking billable hours makes sense for your business. The most obvious reason is that it helps you figure out how much to charge clients. Knowing how long it takes you to complete a project helps you set an hourly rate that allows you to make money and run a sustainable business. Saviom, a resource management and workforce planning software.