Billable and non-billable hours: how to find the perfect balance

billable hours

Thus, tracking billable and non-billable hours is critical as it helps measure efficiencies. Doing this also helps in measuring KPIs in your organization. Which of these internal projects are really necessary, and which aren’t yielding returns in terms of productivity or quality of work? Look at the schedule of various meetings, team building exercises, and other non-billable activities, and ask yourself which of these is helpful. If nobody on your team considers the activity useful, it’s time to stop doing it and focus that time on working with customers.

How much of my time should be billable?

For most service companies, 30 percent is considered a good efficiency rate, while 50 percent would deliver extremely efficient employee costing. That means out of eight hours, if a technician does approximately 2.4 hours of billable work per day, the billable hour percentage averages 30 percent.

If you’re a salaried employee or if you spend time working on projects that aren’t billable, it’s important to show how much of your time is spent doing billable work. When it is time for a raise or promotion, this information can ensure that you’re getting paid fairly for your efforts. Non-billable work means lower profits and higher labor costs. When your employees spend most of their time on non-billable activities, it’s hard to grow your business without adding more people . Billable hours are the bread and butter of professional services firms. Unlike manufacturing, which sells a product, or retail, which sells a service, professional services firms sell the time they spend working.

Billable vs. Non-Billable Hours: What’s the Difference?

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That means it’s good to try and reduce non-billable hours as much as possible while ensuring you increase billable hours. To determine projected billable hours per tech, you must calculate what percentage of a technician’s workday results in billable hours, on average. While the exact numbers vary by industry, a good benchmark is often around 60% utilization. Meaning that up to 40% of money spent on wages is going down the drain. When you calculate the total wages your company pays to its employees, this figure can result in a remarkable difference between your current revenue and how much higher it could be. One of the most significant disadvantages of billable hours is that a client may pay for the time for completing the work rather than the quality. This can be detrimental to a service provider who can deliver high quality work in a fast and efficient manner.

You’ll Be Able To Lay the Foundation for Future Growth

When an auditor performs an audit of financial statements, they record the number of hours worked on the audit and these hours are then billed to the client. To maximize on an attorney’s billable hours, some law practices resort to increasing their overall work hours to upwards of 70 or 80 hours per week. A billable hours quota of over 2,000 hours per annum is not unheard of.

  • There are many cases where employees claim to waste a lot of time.
  • You can easily set billable rates per project right inside of Toggl Track.
  • I’ve been using Hiveage’s predecessor Curdbee for years, and Hiveage improves on Curdbee in every way.
  • The extra burden of non-billable time can be especially trying when a client has a strict deadline that must be met.
  • This blog post will explore how a billable hours chart can help lawyers better track time for invoicing.

In other words, they’re the number of hours a company can charge its clients for doing work on their behalf. By knowing exactly which tasks constitute billable hours and how to keep track, you’ll be ready and set to optimize everything from workflows to invoicing. How many billable hours you aim for will depend on your industry and professional position. It is also possible to monitor the utilization rate of employees working billable hours. Excel has a template specifically designed for managing your billable hours.

The importance of tracking billable hours

As much as such activities are vital to how an organization functions, they’re not directly linked to an ongoing project. For most service companies, 30 percent is considered a good efficiency rate, while 50 percent would deliver extremely efficient employee costing. That means out of eight hours, if a technician does approximately 2.4 hours of billable work per day, the billable hour percentage averages 30 percent. Totaling takes into account how many paid holidays and vacation or sick days each tech gets in a calendar year, so grab your PTO calendar and start counting.

That way, you’ll be able to plan your next day and minimize your non-billable hours. Besides, your employees will get all the necessary information, which means more hours working on the project, less time spent on non-billable activities. Accurate management of your billable and non-billable time as well as costs is the answer. Set employees’ billable and cost rates, mark all tasks as billable billable hours or not, accurately track time and availability. While the ideas of what is billable and what isn’t vary from business to business, and project to project, the idea behind them is basically the same. You need to make sure that you are only charging for work performed and not for personal time spent on non-related tasks. “Clients love to feel like they’re getting something for a better value.

When this happens, the company might end up with a steady loss of revenue. The last thing relevant to tracking billable hours is sending the invoice. Calculate the total hours for each customer and send out a professional and accurate invoice. Download the billable hours’ template for Excel to record your hours worked and hourly pay rate for each client or project in a day. For best results, enter values on your desktop to calculate your total for invoicing automatically. As you work on a client or project, enter your times in and time out.

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Speaking of lawyers and legal professionals, their ideal utilization rate is 100 percent. So, their goal should be striving to achieve as high utilization rate as possible. In 2017, their average utilization rate was 78.8%, but in 2018 – 79.3%.

Record Your Non-Billable Time

So, for example, breaks, personal time, vacation time and meetings about unrelated matters are not billable. Some things, like attending to correspondence and talking to co-workers are harder to either include or exclude. One court has noted that “problems created by billable hours have brought about a storm of criticism directed to the legal profession, especially when there are excessive billable hours”. Lawyers trying to increase their billable hours may behave in ways that are not in the interests of the client.

billable hours