What Are Billable Hours? Short Intro

Billable hours are the work hours spent on a task or a project that can be charged to a customer. The concept is simple: The more billable time tracked, the more you charge your clients.

This is why a complete understanding of what billable hours are and how billable tracking works is pivotal to increasing the profitability of your business.

Key takeaways

• Billable hours tracking in real-time increases your billable hours by 20-30% compared to delayed entries, and it should be a standard practice in your business.
• The ideal ratio to apply on your billable time is around 60-80% of your work hours on revenue-generating activities and the rest on non-billable.
• Bill your clients responsibly by leaving non-billable time like admin tasks or basic client comms out of the invoices.
• A good way to increase billable hours is to raise your rates by a strategic 5-15%; otherwise, you might have to deal with payment disputes.

What are billable hours?

Billable hours are the actual hours worked on a task or client project that can be charged to a customer. They are usually billed to the client at an agreed-upon hourly rate and are pivotal in calculating the total cost of your services.

Typically, billable hours are tied to service providers such as lawyers, consultants, freelancers, agencies, and other professionals who charge clients based on their time and expertise. They represent the core revenue-generating activities that directly contribute to your bottom line.

Why you should track billable hours

Since you’re invoicing the hours worked, the primary and obvious reason coming to mind might be to just send invoices, and get paid.

The reality is that tracking that lucrative time that literally turns into money for your business can surface many other findings. Some examples are understanding if your estimated time for client projects is realistic or simply understanding what eats into your billable time (aka time wasters).

Let’s analyze some other reasons:

• 💰 For the financial benefits: Whether you have a smaller or bigger business, being paid for every minute of work performed for clients is only fair. This helps you pay your bills, your employees, and your tools and truly prevents any revenue leakage that otherwise might affect your business.

• 🥸 To prevent underbilling: Capture all billable activities, including quick client calls, brief email responses, and small revisions that are easily forgotten but add up significantly over time.

• 🔖 To get a sense of your profitability and pricing: With diligently tracked billable hours, you gain insights into how long tasks actually take in comparison to how much you’re charging. Moreover, you can better identify where costs should be reduced and if your resource allocation is done the right way.

• ⚙️ To improve your operations: Pinpoint workflows or processes that could be streamlined and improve your capacity planning and the client billing process overall.

• 👔 Create robust client relationships: Being 100% transparent with your clients and showing them the effort behind your deliverables comes with many benefits: it builds trust, a stronger relationship, and it prevents price disputes.

• ⏱️ To ensure effective time management: Keeping track of total billable hours raises your awareness of how you’re prioritizing tasks and what else is to improve in your time allocation.

💡 Pro Tip: Want to track billable hours but not sure how time tracking is done on any task or activity? I wrote a guide on how to track time spent on tasks that should help you understand the entire process.

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“I have been using EARLY for almost 2 years now. It helped me keep track of my time, the billable hours to customers and gain business” – Fabian G., CTO

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What to include in billable hours 💼

To better understand what you could label as billable, I will provide you with examples targeted for different services and roles charging their time:

• Legal services ⚖️

Generally, in a legal profession like an attorney or paralegal, you could charge for a wide range of things. You could charge from client communication (emails, calls, texts, meetings in-person or video) to legal research and case preparation, document drafting and review or appearing in court, and the time spent traveling to clients.

💡 Pro Tip: Tracking your time in real-time rather than recalling it later increases billable hours by 20-30%. Learn how lawyers track billable hours so you don’t delay your time entries.

• Consulting services 📊

When it comes to consulting services, if you’re offering business consultancy, you could charge for the following billable hours: Discovery and needs analysis meetings, research specific to client challenges, strategic planning sessions, implementation oversight, client training sessions, and others.

The list can be even more comprehensive, but remember to always be reasonable and charge for activities tied to your client’s project. If you offer IT consultancy, you have to bill clients for services like system analysis, technical troubleshooting, network configuration, or solution documentation.

• Accounting services 💰

Accountants and bookkeepers have different time-tracking processes, which include financial record reviews, tax preparations, audits, creating financial statements, as well as consultation on financial matters or software setup for financial tracking.

• Creative services 🎨

If you’re a content writer like me, it’s best to consider the following as billable hours: the research related to assigned topics, content planning and outlining, writing and editing time, SEO optimization, client revisions (within the agreed scope), or content formatting.

As graphic designers, your billable hours are slightly different, such as initial client briefings, concept development, design execution, revisions (within scope), file preparation and delivery, as well as stock image research and selection.

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“Was I really undercharging that much? It was an eye opener to actually see how much these hours of – it’s only a quick job – added up.” – Debi H., Digital Marketer

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Concluding, billable hour requirements are not complicated, but they should be directly related to the client’s work and the time you spend on that.

In general, as a good practice, try to be reasonable and review your time entries before invoicing to make sure they clearly communicate the value you’re delivering to clients. Vague descriptions often lead to payment disputes and undermine client trust in your billing practices!

What not to include in billable hours 🚫

Understanding what shouldn’t be included in your billable hours is just as important as knowing what you should include.

Non-billable hours represent time spent on tasks that cannot be directly billed to a client’s projects and, hence, do not increase business revenue. Non-billable work is usually related to business operations and employee development.

Adding these types of costs on your customer damages trust, leads to payment disputes, and potentially harms your professional reputation. No service provider wants that, so let’s explore what should stay out of your client invoices:

• Basic client communication ✉️

Though I wouldn’t suggest leaving work unbilled, some routine and quick communications are expected to be unbilled. Here, we’re talking about brief status updates or quick clarification emails, scheduling meetings or calls, follow-up communications about payment, or small talk for relationship maintenance.

These help you build your relationships and make your clients trust you.

• Correcting your own mistakes ⚠️

Clients shouldn’t pay for your errors or inefficiencies. So, redoing work due to your misunderstanding of requirements, the time spent fixing technical issues on your end, re-creating lost work, recovering corrupted files, or addressing quality issues identified by the client should not be charged as billable hours.

• Admin work 📋

Look, we all have to do these kinds of things in our businesses, and just like me, you’re probably not a fan of them, but our clients are not responsible for paying them.

Also, most clients expect these operational activities to be covered by your overhead and not by them. For example, answering phone calls, replying to emails, filing overall paperwork, setting up your workspace or equipment, and other admin work count as non-billable work.

• Your professional development 📚

Unless you’re employed by a company, the reality is that a company doesn’t care to invest in your skills, but they do care for you to perform. So, take responsibility for your own growth and keep the workshops or webinars, professional certifications, study time, as well as conferences on your account.

💡 Pro Tip: While you shouldn’t bill for learning new skills, you can charge for applying those skills to client projects. The distinction lies in whether the knowledge acquisition is primarily benefiting you versus directly benefiting your client.

• Business development activities 🤝

Growing your own business is not on your client’s mind, so these are activities for your investment in future business. Your time creating proposals or quotes for prospective clients, networking events, or relationship building, as well as writing blog posts for your own website, shouldn’t be charged either. Neither marketing your services on social media or creating portfolios or case studies of past work.

💡 Pro Tip: Many successful service providers use a “buffer zone” approach—they don’t bill for the first few minutes of activity (like a 5-minute phone call) but start the clock when the activity extends beyond that threshold.

How to track billable hours

Keeping track of how many billable hours your business makes should be a standard hygiene practice that keeps your business’s health in check.

From understanding project profitability and how to increase revenue from existing customers and ultimately maximizing revenue, your time-related data lies at the backbone of every decision you should make.

You can track billable hours in many ways, from timesheet templates to calendars, pen and paper, but I’ll introduce you to the simplest and most effective way: a billable hours tracker.

Enter EARLY – the time tracker that turns mundane billable hours tracking into a one-click enjoyable activity.

Built for teams and professionals who care about their productivity and want to track billable hours correctly, it allows you to start and stop a timer for each billable task, generating insights and reports showing the time spent on each task and the money you can bill.

You can filter, customize, and export the reports with a few clicks. How easy and convenient is that?

Here’s the process of tracking billable hours with EARLY:

1. Create a free trial account in EARLY.
2. Add the tasks you’re planning to bill for in a client folder.
3. Label each task as billable or non-billable time.
4. Add a billing rate to each task.
5. Track time and automatically collect insights on your billable hours (presented in a clear billable hours chart).

At the end of tracking your billable hours, you’ll get an overall overview of your billable and non-billable hours.

When you track time with EARLY, you get immediate answers to questions like:

• Are we spending time only on profitable projects and clients?
• How much time do we spend on billable tasks?
• Do we have enough billable hours to keep our business running?
• What should be our hourly rates for specific tasks?

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How to calculate billable hours

Calculating billable hours is easy. You need to take how much you’ve worked and multiply it by your hourly rate. 

Billable hours = hourly rate x billable working hours

How to calculate billable hours: example

• Hourly rate: 40$
• Billable working hours: 20

Billable hours = 40$ (hourly rate) x 20 (billable working hours)
Billable hours = 800$

💡 Pro Tip: If you’re using EARLY, add your hourly rate to each activity, and it will automatically calculate the total number of billable hours for your invoices. If you’re still confused about how many billable hours to charge for, I’ve written a guide on how to calculate billable hours.

Methods to increase your billable hours

There are many ways for you to increase your billable hours smartly. Strategic approaches to your time management can dramatically increase your billable capacity without extending your workday.

Here’s how to optimize your billable hour efficiency:

1. Batch similar tasks to minimize context-switching

Context switching (moving between different types of tasks) can cost you up to 40% of your productive time. When you jump between different clients or project types, your brain needs time to reload the relevant information and get back into flow. This way, you’re basically wasting time on non-billable tasks.

What to do?

• Dedicate specific days or chunks of the day for specific clients or project types.
• Block 90-120-minute focused sessions for single-client work and block all notifications. Customize your notifications so that only emergencies can get to you.
• Group similar activities (all research, all writing, all design) across projects in chunks of time, and try to stay away from jumping from one to another.
• Process all client comms during dedicated time blocks.

2. Use a time-tracking software to track everything for you

You won’t know if you’re reaching your billable potential as a company unless you have an objective time audit at hand, based on which to make decisions of simplifying or changing your workflow entirely. If you believe you have poor time management within your team, you need a report to surface that and start slowly changing work habits to capture more billable hours.

What to do?

• Create standardized task categories across all projects inside the time tracking software.
• Configure automated reminders to track time throughout the day.
• Schedule weekly reviews of non-billable tasks.
• Use the reporting features to identify productivity patterns.

3. Template recurring deliverables to reduce production time

Why recreate what you’ve already done well? Templates save tremendous time while these help you keep consistency across your work.

What to do?

• Create standardized project kickoff docs, create reusable sections for reports and proposals, and put them all in a library.
• Build standard meeting agendas and follow-up formats, create modular content blocks that can be customized quickly, and document your processes to streamline repetitive workflows.

4. Set daily or weekly billable hour targets to stay on track

It’s as simple as the saying: What gets measured, gets managed. Also, once you know where you’re heading, you’ll be motivated to reach that objective, while these targets create accountability within your team.

What to do?

• Start by calculating your ideal monthly billable hours and divide them by working days and weeks.
• Set progressive targets that increase gradually, and create visual trackers so that your team monitors progress.
• Review the performance weekly to identify patterns, opportunities and if there’s anything to adjust.

5. Take on more tasks from your current clients

It sounds obvious, but logically, if you can expand your service offerings with existing clients, it’ll be much easier to reach your billable hour goals. Clients who already know and trust your work are more likely to engage you for additional work. This strategy is even better than acquiring more clients, as there’s no acquisition cost on your side.

What to do?

• Structure your retainer agreements to include regular strategy sessions, and in these sessions and audits with clients, identify unaddressed needs or pain points you could solve.
• Create a “menu of services” document highlighting your full capabilities, and from time to time, offer small “trial” projects for new service areas to build client confidence.

6. Raise your rates

Last but not least, increasing your hourly rates is often the most direct way to increase business profitability without working additional hours. Strategic rate increases allow you to earn more while potentially taking on fewer, higher-value projects.

What to do?

• Do research on current market rates for your expertise and experience level to make sure you’re raising your rates fairly.
• Segment your client base, consider different rates for different client types, and announce rate increases with advance notice (30-90 days) to existing clients.
• Clearly communicate the added value that justifies your new rates, but also consider grandfathering long-term clients at slightly lower rates.
• Implement these increases gradually (5-15%) rather than dramatic jumps.

Billable hours bottom line

It’s quite clear that staying on top of your billable hours is vital for your business, especially for service-based professionals who want to build sustainable, profitable businesses.

Whether you’re a seasoned consultant or just starting your freelance journey, understanding how to properly track, optimize, and leverage your billable time directly impacts your bottom line.

By implementing the strategies outlined in this guide—from using dedicated time-tracking software to raising your rates strategically—you’ll transform your approach to billable hours from a necessary administrative task into a powerful business optimization tool

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