Turn Time into Revenue : Billable Vs. Non Billable
In the professional world, especially within service-based industries, understanding the distinction between billable vs non-billable hours is crucial for efficient time management and accurate invoicing.
Time tracking software plays a pivotal role in this process, providing the tools necessary to monitor and categorize work hours.
The key difference between billable vs non-billable time is their impact on revenue.
Billable time includes client-related tasks that can be invoiced, such as project work and client meetings, generating income. Non-billable time involves internal activities like administrative tasks and training, which are essential but do not directly generate revenue. Accurate tracking of both is crucial for transparency and profitability.
Further in the blog, we will dive into the concepts of billable vs non-billable time, exploring their definitions, implications, and the benefits of using time tracking software to manage them effectively.
What is Billable vs. Non-billable?
Billable time is when employees work on tasks that can be charged to clients, like working on projects or meeting with clients. This work brings in money for the business.
Non-billable time includes tasks that cannot be charged to clients, such as internal meetings, administrative work, and training. These tasks are important for running the business but do not make money directly.
Tracking billable vs non billable hours helps businesses stay organized and profitable.
Why is it important to track billable hours?
Tracking billable hours is crucial for several reasons:
Accurate Invoicing
It ensures that clients are billed correctly for the work done, preventing under or overcharging and maintaining trust in the business-client relationship.
Revenue Optimization
By understanding how much time is spent on billable tasks, businesses can identify areas where they are most profitable and allocate resources accordingly.
Transparency
It provides transparency to clients about how their money is being spent, fostering trust and accountability.
Project Billing
Tracking billable hours enables businesses to bill clients accurately for project work, ensuring that all hours worked are accounted for and billed appropriately.
Financial Planning
It aids in financial forecasting and budgeting by providing insights into revenue streams and resource allocation.
Performance Evaluation
It allows businesses to assess employee productivity and efficiency, enabling better performance management and incentive programs.
Difference between Billable vs Non bIllable
Distinguishing between billable and non-billable tasks is crucial for efficient time management and accurate financial reporting. Billable tasks are those directly linked to revenue generation, while non-billable tasks are essential for business operations but do not contribute directly to income. Understanding these distinctions helps businesses optimize resource allocation and ensure transparency in client billing.
Determining billable vs non-billable hours can be a constant struggle, but we’re here to help you with it.
Billable Tasks
Billable tasks are directly invoiced to clients and contribute to revenue generation. Common examples include:
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Project work: Hours dedicated to completing tasks outlined in client agreements.
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Client meetings: Time spent discussing project specifics, progress, or feedback with clients.
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Deliverables: Tasks directly related to producing client deliverables or outcomes.
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Consultation: Providing expertise or advice to clients on relevant matters.
Tasks That Could Be Billable or Non-Billable
Some tasks may blur the line between billable and non-billable, depending on specific circumstances.
Examples include:
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Travel time: Billable if agreed in the contract, non-billable if part of regular operations.
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Proposal preparation: May be billed as a separate service or considered non-billable.
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Research & Development: Billable for client-specific projects, non-billable for general improvements.
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Client communication: Included in project fees or billed separately for extensive communication.
How many working hours should be billable ?
Now that you understand billable vs non-billable hours, you might be wondering how many of your working hours should be considered billable.
To answer that,there’s no one-size-fits-all answer to how many hours should be billable. Here’s why:
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Industry: Some fields, like law, might target a higher percentage of billable hours than others.
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Project Type: Fixed-price projects might have less wiggle room for non-billable tasks compared to hourly billing.
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Company Culture: Some companies prioritize high utilization (billable hours), while others value a healthy mix with professional development.
However, a good rule of thumb is that 30 hours out of a 40-hour workweek is a common target for billable hours. This leaves room for essential non-billable activities like meetings, admin tasks, and professional development.
Ultimately, the key is finding a balance that keeps you productive, profitable, and sane!
How to track billable hours?
There are two main methods for tracking billable hours, each with its pros and cons:
1. Manual Logging:
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Pros: Simple and free (if using pen and paper), good for understanding workflow.
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Cons: Time-consuming, error-prone (easy to forget to log), requires discipline.
How to do it:
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Spreadsheet: Create a spreadsheet with columns for date, client, project, description, start time, end time, and total hours. Manually record your work as you go.
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Time log: Similar to a spreadsheet, but a dedicated paper notebook for recording time entries.
2. Time Tracking Software:
Pros
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Automatic timers: Eliminate manual entry with automated timer that starts and stops automatically, capturing your billable hours with ease.Time tracking software provides automated timesheets, which help in accurately recording work hours and ensuring precise billing.
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Project & client categorization: Easily organize your time entries by assigning them to specific projects and clients, ensuring accurate billing.
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Reporting & analytics: Gain valuable insights with reports and analytics that track your billable hours, identify trends, and optimize your workflow.
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Integrates with invoicing tools: Streamline your billing process by seamlessly integrating your time tracking data with your invoicing software.
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Project billing capabilities: Time tracking software options give precise project billing capabilities, allow you to manage project budgets, set billing rates, and generate invoices directly from your tracked hours, saving you significant time and effort. You can also manage your project backlog using a time tracking software.
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Cons:Often has a subscription fee.
Popular Options
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Clockify
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Toggl Track
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FreshBooks
Tips for Accurate Time Tracking:
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Decide what’s billable: Before you start, determine what tasks qualify as billable for your clients.
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Track time consistently: Log your hours throughout the day, not just at the end.
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Use reminders: Set alerts on your phone or computer to prompt you to log time.
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Remember, the best method is the one that works best for you and ensures accurate billable hour tracking.
Benefits of tracking billable hours
Tracking your billable vs non-billable hours isn’t just about filling out invoices; it’s a powerful tool that provides valuable benefits for both you and your business. Here’s how:
In short, tracking billable hours empowers you to work smarter, not harder. It gives a world of financial clarity, and control over your most valuable asset – your time.
Automate Billable & Non-Billable Hours with Desklog
Tired of manually tracking billable hours and juggling spreadsheets? Desklog can be your time-saving hero!
Here’s how it streamlines your workflow:
Effortless Time Tracking:
Automatic Timers:
Ditch the manual stopwatch. Desklog offers automatic timers that start and stop based on your activity, capturing your billable hours seamlessly.
Project & Client Categorization:
No more scrambling to remember what you worked on. Assign tasks to specific projects and clients with ease, ensuring accurate billing and project insights.
Simplified Billable Hour Management:
Billable Hour Designation:
Clearly mark tasks as billable or non-billable right from the start. This eliminates guesswork and ensures your invoices reflect the time you deserve to be paid for.
Project Billing Rates:
Set individual billing rates for projects or tasks, giving you the flexibility to manage client budgets effectively.
Powerful Reporting & Insights:
Detailed Reports:
Generate comprehensive reports that break down your time by project, client, and task. Gain valuable insights into your billable hours and identify areas for optimization.
Data-Driven Decisions:
Use Desklog’s reporting to understand your workflow patterns and make data-driven decisions to improve efficiency and profitability.
Invoicing Made Easy (with Integrations):
Seamless Integration:
Many invoicing tools integrate with Desklog. This allows you to automatically transfer your tracked billable hours into professional invoices, saving you significant time and effort.
Faster Client Payments:
Get paid quicker by sending out accurate invoices that reflect your tracked billable hours. Desklog helps streamline the invoicing process for both you and your clients.
Additional Desklog Features:
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Project Time Tracking: Desklog goes beyond time tracking. You can track project time with features like task management,Kanban boards, and file sharing, allowing you to manage your projects from start to finish.
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Offline Tracking: Desklog keeps track of your time even when you are offline. Offline time tracking feature seamlessly syncs your entries when you reconnect, ensuring no billable hour goes unaccounted for.
By making use of Desklog’s automation features, you can free yourself from the drudgery of manual time tracking and focus on what you do best – delivering exceptional client work.
Conclusion
In conclusion, understanding the difference between billable and non-billable hours is essential for any service-based business. By implementing time tracking strategies, like those offered by Desklog, you can gain valuable insights into your workflow, optimize project management, and ensure accurate client billing. This not only improves profitability but also fosters trust and transparency in your client relationships.
So, ditch the manual spreadsheets and welcome the power of automation.
Meet The Author
Product Specialist & Research Head
