Billable and non-billable hours are two pieces of a puzzle that should fit together easily. Without one or the other, the picture isn’t really complete – if you don’t have billable hours, a business isn’t profitable, and without non-billable hours, you’re missing out on important in-house work that will keep your business going strong.
earn you and your business money; any time spent on something directly for your clients, and that they are So, what are billable and non-billable hours? What’s the difference between them, and why do you need to track them both? Read on and find out why doing so can help you and your business easily charge clients exactly the right amount, and be more efficient and profitable.
What are billable hours?
Billable hours are those that earn you and your business money; any time spent on something directly for your clients, and that they are therefore directly paying for, is billable. Those things might include:
- Meetings with clients
- Emailing and liaising with clients
- Planning projects with/for clients
- Working on clients’ projects
So if a client asks for it or you’re doing something for them, it’s billable time.
Why track billable hours?
The reasons for tracking billable hours speak for themselves – without knowing how much time you spend on a client’s project or working with that client, it’s hard to figure out what to charge them. Knowing how much time you spent working with a client means easily knowing how much you’re owed.
If you’ve read about why you should be using timesheet templates, you’ll know how boring it can be figuring this kind of thing out without having kept track. Avoid that boredom altogether by tracking your billable hours.
Knowing how many of your work hours are billable and what that time is spent on can also help you improve how you manage your team and resources. If you know what your team is working on, you can allocate resources better and make the job easier.
And, you can get more people working on the things that take longer if you need to. That way, your team is working the same number of billable hours, they’re just spread across more people so things get done faster.
What are non-billable hours?
Non-billable hours are ones that you aren’t doing directly for a client. Of course, you’re working to make and keep the clients happy, but not everything is directly for them. These might be things like:
- Internal meetings
- Emailing and liaising with your team or within your company about company matters
- Admin work for your company
- Writing proposals for to try and get new clients
Sometimes it’s a little harder to tell what time is billable and non-billable, but if you ask whether the work you're doing is directly for a client, that usually tells you the answer. If you’re a consultant working on streamlining a process for a client, that’s billable, but if you’re streamlining one of your companies’ processes, that isn’t.
Why track non-billable hours?
One big reason for tracking your non-billable hours is that it can help you identify the most profitable projects. If you can see that certain kinds of projects have unexpectedly low amounts of billable hours but lots of non-billable hours, then you know those projects aren’t being done efficiently. They’re taking a long time to complete, but not a lot of that time is billable, so those projects are unlikely to be very profitable.
If that keeps happening with certain types of projects, then you might want to reconsider taking those projects on. Or, at least reconsider how you approach them. Being able to see what the time is being spent on might help you streamline the way you work on that type of project.
Tracking non-billable hours gives you a deeper understanding of where your time is going. Specifically, it’s great to be able to see whether there are inefficiencies in how you and your team are spending time. Are multiple people working on the same things? If so, delegate all those tasks to one person and have others work on something more productive. Are people spending longer than necessary on things that could be streamlined? You might be able to find a way to do those things more quickly, perhaps by using Excel or a coding language like R or Python. Or, if there’s good software that can do the task for you, automate it!
A more admin-related reason is that tracking non-billable as well as billable hours means you’ll know what to pay your employees much more easily. Or if you’re an employee, know whether you’re being paid what you should be. When I say it’s easy to avoid boring conversations trying to figure out what to pay your employees, I mean it!
Time tracking with Timely
The most important thing is to track everything. Whether it’s checking your emails (a quarter of our day can be spent on emails), being on a phone call, or organising an internal meeting - every activity at work should be tracked to ensure an optimized workflow.
The easiest way to do that is by using a time tracking app like Timely. It’s automatic, 100% private and can give you detailed reports on how you and your team spend your day.
Plus, it can track projects, budgets and team capacity. Did we mention that it does that all automatically…?
So, we’ve seen that tracking both billable and non-billable hours is crucial. If you don’t track one, you don’t have the full picture of how you’re spending your time. Let’s recap quickly:
Billable hours are those spent working for your clients directly, and that they pay for directly. Things like client meetings, emails, and working on their projects. Non-billable hours aren’t spent directly on clients – internal meetings, emails, and the like.
You need to track both of them to best allocate your resources, time and people. Without knowing what you’re doing with your time and resources, there’s no way you can decide how to use them well. Tracking one ensures you charge clients correctly; tracking the other helps you identify inefficiencies that slow your business down.
Use Timely for an easy way to track both billable and non-billable hours.