What Is Billable Time?

Billable time can be defined as the time professionals or organizations allocate to working on tasks that they can charge clients for. Different clients may have different definitions of what exactly falls into the billable time category based on project requirements.

What Falls Into the Category of Billable Time?

  • Working on project tasks
  • Planning project progress
  • Developing timelines for projects
  • Research
  • Client meetings
  • Answering emails and other client-related communication
  • Revising project progress

Billable Time Vs. Non-Billable Time

While billable time represents the project and client-related tasks, non-billable time includes work tasks that aren’t directly project-related but are general, such as:

  • Weekly or monthly staff meetings
  • Employee performance reviews
  • Networking
  • Conferences

To put this into perspective, answering a manager’s email is not billable time but answering a client’s email or phone call is billable. Similarly, annual employee reviews aren’t billable, but in-house client meetings are billable.

Determining Billable Time

It can sometimes be challenging for professionals to determine whether specific tasks should be billed to a client or fall into the non-billable category, as the distinction is not always obvious, it depends on the particular practices of a client or a company. 

Professionals can navigate this challenge by asking themselves the following questions.

  • Does the time spent on these tasks help with project completion?
  • Does the time spent on these tasks bring more benefits to the professional or the client?
  • Are the tasks included in the scope of the project per the project contract?
  • Is the time spent on these tasks a client’s request or is it voluntary?

If the answer to all of these questions is yes, then the client should be billed.

How Is Billable Time Calculated?

There are quite a few ways to calculate billable time – from spreadsheets and timesheet templates to digital time tracking software apps

Regardless of the method, the process includes setting an hourly rate and invoicing schedule and creating a time log

Setting an Hourly Rate

Before a freelancer or a company can start tracking billable time, they need to set a billable hourly rate for clients, usually based on the average rate range in their industry. 

In order to come up with a billable hourly rate, they also calculate the labor costs and business expenses and set an hourly rate that will prove profitable in the long run. When a company or freelancer bills a client, the payment they receive doesn’t include taxes, labor costs, and business expenses, so making these calculations is a must if they want to make gains.

Setting an Invoicing Schedule

Once the final billing rate number has been established, an invoicing schedule can be set. The most common invoicing schedule is a monthly invoice, but it can also be weekly or bi-weekly.

Creating a Time Log

A time log is a record of the time spent on specific tasks, projects, or project-related activities, which makes it part of the billable time category for clients. Time logs can be created using spreadsheet software like Excel or Google Sheets or digital templates but using a time tracking software is superior. 

Time tracking software not only automates the entire time tracking process, but has a far wider range of features than Excel or Google Sheets. These include visual reports, approvals, edits, audit logs, and additional time tracking details, such as project description, project tasks start/end times, additional expenses, etc.

How to Increase Efficiency in Tracking Billable Time

  • Tracking all billable time.
    This may include short phone calls with clients, sending emails, and similar tasks that take only a few minutes to complete.
  • Real-time tracking.
    There are cases when billable hours might be overlooked because they weren’t tracked in real-time. This is easily prevented by using time tracking software that includes real-time tracking features.
  • Tracking non-billable time.
    Tracking non-billable time is also beneficial, as it can give professionals and companies a better idea about the percentage of work hours actually allocated to client or project work compared to the hours spent on non-billable tasks such as administrative duties.