Blog Employee billable time and how to track it right

Employee billable time and how to track it right


If you’re a professional working in one of the several industries billed by hourly rate, you might be wondering about the best way to do it. Optimizing your billable hours means providing the best possible service for clients while also maximizing profits, so it’s important to use them effectively.

Here, we’ll give you an overview of billable hours, including what they are, some examples, how to calculate billable hours, the benefits, and how to use software to track billable hours.


What are billable hours?

In short, billable hours are the hours of work which will be charged to a client using an hourly rate. This means that the client is only charged for work concerning their project, and the professionals are paid for all work done on the client’s project.


Billable vs non-billable hours

On the other hand, time spent on unrelated work is considered non-billable time. However, although the definitions are clear, there is room for ambiguity when it comes to defining which tasks are related to a project, and businesses may also choose which tasks are billable or not.


Examples of billable and non-billable time

Here are some examples to illustrate:

  • Work done directly on a project
  • Conducting research for the project
  • Project planning
  • Correspondence or meetings with the client
  • Revisions requested by a client


However, there are some tasks which shouldn’t be billed to a client, such as:

  • Administrative tasks
  • Internal correspondence or meetings
  • Work for any other clients
  • Business planning or marketing
  • Networking
  • Work outside the scope outlined in the project
  • Anything else not related to the client’s project


A good rule of thumb when determining whether a task is billable is to determine whether it contributes to the project.


How to calculate billable hours

Set your hourly rate

First, decide the rate you will charge to your clients. This should be based off the annual salary you’d like to earn, as well as the rates of similar businesses.


Determine an invoicing schedule

Decide when the invoices will be sent. For many businesses, that will be once a month at the end of the month.


Create a time log

In order to charge by the hour, you need to track the hours worked on a project. You can use basic spreadsheet software to keep track, but time tracking software is an effective option that will let you assign tasks to a client and track as you work.


Track your hours by project

When working on multiple projects, record your hours by project so that you can bill accurately.


Calculate your total hours

Once the billing cycle or project is complete, use your time log to calculate the total amount of billable hours by multiplying the amount of billable hours by your billing rate. This isn’t just good for invoicing – it will also help you manage your time well.


Create a detailed invoice

Create an invoice which you will send to the client. This will give them a clear and transparent record of how you have chosen the spend the time they are paying you for. The right software can create this invoice for you based on your time sheet.


How to confidently increase billable hours

Luckily, there are ways you can make the most of your billable hours and earn more money, letting you increase your house while working transparently and honestly.


Track your time thoroughly

It’s important to track all time spent on a project, even if a task only takes a small amount of time. Short meetings and emails might not seem like much, but they can add up. Additionally, you should track your time as it happens, as tracking later in the day could lead to tracking time inaccurately – you don’t want to overlook any time.

Read on: 7 Golden rules of employee time tracking.


Optimize your time spent

Tracking your time will let you see what non-billable tasks you might be spending too much time on – time that could be better spent on projects. That could mean administrative work that might be better left to software, or even time spent procrastinating.

Read on: How to master your time management.


Benefits of tracking billable hours

Reduce unproductive time

Lack of productivity can slow down a project and cause you to miss deadlines. Tracking billable hours gives employees extra incentive to work efficiently.


Create more free time

Time spent wisely means more time is left over to spend on other, non-billable valuable activities such as networking, planning, or even organizing your workspace.

Learn how to organize your time efficiently with our guides to the time management matrix and the Pomodoro Technique.


Improved return on investment (profit on hour engaged)

Tracking time spent on a project or client lets you see how profitable the work is. And with better time management increasing productivity, that can translate into an improved ROI.


Be fair and transparent when invoicing clients

When your clients pay you, they want to know that they’re getting their money’s worth. Billable tracking software lets you communicate this to them as transparently as possible and shows proof of your hard work.


Optimize billable hourly rates

By getting greater insight into billable hours, you may find that you could adjust your hourly rates according to the pace of work.


Evaluate employees’ work

If your time tracking shows that one employee takes longer to complete a task, it could mean that they need some help or that the work could be done more efficiently by someone else. Tracking billable hours means that you can spot areas for improvement more easily and evaluate employees’ work.


Which industries bill by the hour?

Billing by the hour may be more or less common depending on the industry. Law firms, IT companies, accountants, marketing, HR companies, PR firms, consultants of all kinds, and freelancers are all people or businesses who can benefit from billing by the hour.


Billable hours tracker software

Managing your billable hours well is an essential part of providing the best value possible for clients. Billable hours tracking software is an accurate and convenient way of managing billable hours and can even generate reports for invoices for you.


Benefits of using software for billable hours

When you use dedicated software for tracking billable hours, you can:

  • Save time
  • Record time more accurately
  • Sort hours by project
  • Easily create invoices

For more information on how Vault can help you track your billable hours effectively, check out our time tracking module or request a demo today.



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