Tracking billable hours isn’t just about clocking time. It’s about knowing which hours are valuable and how to manage them effectively. If you’re working in a field where you charge clients by the hour—like legal, consulting, or freelancing—getting billable hours right is crucial. It ensures you get paid correctly and helps your business stay on track financially.

What Are Billable Hours?

You need to understand the difference between billable and non-billable hours. Clients typically pay these hours at an agreed hourly rate, usually outlined in a contract. But here’s the thing—billable hours don’t just include “work hours.” They include anything that directly benefits the client’s project, from meetings to research and even phone calls.

For example, if you’re a freelance designer working on a website for a client, the time spent creating mockups, coding, and meeting with the client counts as billable. But what time do you spend responding to emails unrelated to the project or attending an internal meeting? Not billable.

Billable vs. Non-Billable Hours

You need to understand the difference between billable and non-billable hours. Billable hours directly contribute to a project or client work, while non-billable hours include internal tasks or administrative work.

Examples of Billable Hours:

• Client meetings (virtual or in person)
• Emailing or messaging clients about the project
• Research or drafting documents related to client work
• Revisions to a client’s project

Examples of Non-Billable Hours:

• Internal meetings or brainstorming sessions
• Training or learning activities
• Business development work like pitching to new clients
• Administrative tasks like invoicing or payroll

Knowing how to track these hours accurately is key. You don’t want to end up losing money because you forgot to log a phone call or meeting that took place. Conversely, you also want to avoid billing clients for hours that are not part of their project.

How to Track Billable Hours

Tracking billable hours starts with a few basics: a solid system to log time and the tools to make it easier. If you’ve got multiple clients or complex projects, using a tool that integrates with your other work apps can save you time and help avoid errors.

1. Set an Hourly Rate

Before you start tracking time, you must know how much you’ll charge per hour. It should reflect your skills, experience, and industry standards. Whether you’re a lawyer, consultant, or freelancer, this is the starting point.

2. Use Timesheets or Software to Log Hours

Timesheets can be manual, using a simple Excel sheet, or automated through software. Many apps help track billable hours—some of the best include QuickBooks Time or TimeMiner. These tools can help track hours as they happen, making it easier to charge accurately.

3. Record the Tasks You’re Doing

You don’t have to track every minute of your day, but it’s essential to log the billable tasks. For example, if you’re meeting with a client for an hour, track that hour. If you’re drafting a report for them, also track that time.

4. Summing Up the Hours

After completing the work, calculate your total billable hours before sending the invoice. If you’ve been tracking time with a timesheet or time-tracking app, this is simple. Add up the hours worked for the client and multiply it by your hourly rate.

5. Send the Invoice

After calculating your billable hours, you can create and send an invoice. Your invoice must be clear. Clients should see the completed tasks and the hours spent on each. This transparency builds trust and helps avoid any misunderstandings.

Why You Should Track Billable Hours

Tracking billable hours is crucial, especially if you’re working for yourself or running a small business. It helps ensure accurate invoicing and lets you understand how you spend your time.

Here’s how tracking billable hours benefits your business:

• Accurate Invoicing: Clarity about what you charge helps clients appreciate the value. Tracking and invoicing only the hours spent on their project ensures you receive payment for every minute you work.
• Better Time Management: When you track hours, you can identify inefficiencies. Are you spending too much time on non-billable tasks? Are you overstaffed or understaffed on certain projects? Tracking billable hours helps you optimize your workload.
• Improve Profitability: By understanding how much time you spend on each client, you can evaluate whether certain projects are more profitable than others. This data can inform your future pricing and project management strategies.
• Increase Employee Accountability: If you run a firm or have a team, tracking billable hours helps ensure everyone is staying productive and working efficiently. It also helps managers allocate resources better.

How Many Billable Hours Are “Normal?”

Your industry determines the number of billable hours you aim for. For lawyers, 2,000 billable hours a year is often the target. That’s a lot of hours! In contrast, freelance graphic designers or consultants may aim for fewer billable hours depending on the scope of their work.

One metric that firms use to measure productivity is the utilization rate. It is the percentage of your total working hours that are billable. The formula is simple:

Utilization Rate=(Billable HoursTotal Hours Worked)×100\text{Utilization Rate} = \left(\frac{\text{Billable Hours}}{\text{Total Hours Worked}}\right) \times 100Utilization Rate=(Total Hours WorkedBillable Hours​)×100

For instance, if you’re a lawyer working 40 hours a week and bill 30 of those, your utilization rate is 75%.

To Bill or Not to Bill?

Deciding what to bill for can be tricky, but a clear understanding of billable versus non-billable time is essential. When in doubt, ask yourself, “Did this task contribute to the client’s project?” If it did, then it’s likely billable. You should not bill hours if they don’t contribute to the client’s project, such as when you’re working on internal planning or admin tasks.

Tracking billable hours might seem like a hassle at first, but it becomes second nature once you get into the routine. You ensure fair compensation for your hard work by tracking billable hours.

Increasing Your Billable Hours

To increase billable hours without cutting corners, focus on efficiency. Track every billable task, no matter how small. Use tools to automate or streamline your non-billable tasks like admin and invoicing. The more time you spend on billable work, the more you’ll earn.

Final Thoughts

Tracking and managing billable hours effectively can greatly impact your business’s profits. Understanding what counts as billable time, using the right tools, and keeping accurate logs ensures you’re pretty compensated while maximizing your productivity.