Many professionals working on hourly assignments know how complicated it is to properly track their billable work.
And while they work for their clients, they also perform several activities that don’t really add up to the customer’s invoice. But it cost the worker’s time and money.
Many professionals struggle to properly track and balance non-billable and billable time.
This article will show how to do exactly that – with a little help from technology.
Billable VS Non- Billable Work: What’s The Difference?
What are billable and non-billable hours?
We can define billable work as the hours pertaining to the work directly related to the client’s projects. It’s quite easy to understand what is billable work.
So any part of the work from project planning, to project research, from project execution to meetings (yes, meetings) are included in the final count. That is, of course, as long as the activities are related to the client.
Whereas non-billable work is time spent on tasks that you cannot directly bill to clients.
Freshbooks.com has a complete list of examples on non-billable tasks:
- Developing proposals for new work
- Pitching new work to clients
- Consultations and meetings that take place before signing a contract
- Training courses that apply to your business beyond a single client’s project
- Social and team-building events
- Networking events
- Work that is beyond the scope of the project, as outlined in your contract
- Fixing your own avoidable errors
- Invoicing, processing payments and performing other administrative tasks
The Balance To Profitability
You can see from the list above, that there are so many activities in a company’s life that are a cost, but cannot be charged to a client.
To strike a balance and reach profitability, companies must be very careful about how they market and charge their services. And it’s not just companies: freelancers and solopreneurs have all the same problems.
How To Track Both Billable And Billable Work
#1 Track all Billable and Not Billable work
When you calculate profitability, you cannot rely on guesstimates.
Also, spreadsheets become unmanageable if you start working with lots of data.
To keep track of the billable and unbillable work you do, it’s better to rely on time tracking software for more accurate data.
Timeneye, for example, lets you create billable projects and set hourly rates for the whole project (if you work solo) or for each employee (for companies):
You don’t have to make difficult calculations every time because the platform will show the totals to you.
After you’ve started tracking your billable time, make sure to keep track of how much you have already invoice your client, and how much is left. This is crucial for creating accurate invoices, to avoid overcharging or undercharging the client.
In Timeneye, you can mark every time minute as billable (still to be included in the invoice) and billed (that you have already charged).
Tracking non-billable work shines a light on the activities in your business. This is all information you should know to improve productivity and, most importantly, keep an eye on profitability.
Within a billable project, for example, there can also be some activities that you cannot bill the client and include in the invoice. But those activities must end up in your timesheet otherwise you’ll never know about them.
#2 Create detailed time reports
The great thing about using time tracking software is that the data is available for reporting and evaluation.
You can export all the time you track, and take a look at how the time was used and identify cost sinks.
So, make a habit of running reports on the billable and non-billable activities of your business.
This serves several purposes:
- Transparency with the client: you can export a detailed timesheet of the activities you carried out for the client and attach it to the invoice;
- Internal evaluation and analysis;
- Transparency within the business;
#3 Analyse, Adjust, Repeat
Time tracking data is not just a mere calculation of how many hours you have worked.
They also give you insights on where, how, and why you spend your time.
It’s not enough to run reports to count the amounts you have to invoice. You also have to ask yourself if you’re using that time in the best way possible.
Let’s say you invoice a project for a certain $$$ amount. Then, you look at the time tracking data, and you find out that in for that project/client you have spent an enormous amount of time just in taking care of emails.
That time is difficult to bill your client, but these hours have been already gone and you cannot take them back. They definitely have a cost on your business.
So you can take action for future projects to make sure you communicate better with the client. Perhaps you can invest in a communication tool. Or, you can simply set better communication rules with your client to avoid drowning in the endless sea of email.
Or, let’s say you offer a free marketing analysis of your client’s business included in your client’s contact. You don’t actually charge the client for it.
This may seem a good idea to attract new customers in the short term, but if you find out that that analysis took you more time and cost you more than other phases of the project, you may want to reconsider your offer.
Bonus tip: calculating profitability
If you know the hourly costs of your business, you can roughly make a calculation of the profitability of your project by calculating how much time you present on it, how much you charged it hourly, and how much it cost you.
You should always keep track of this calculation to avoid your precious time and money going down the drain.
(Timeneye makes this calculation automatically if you don’t want to lose time filling spreadsheets over and over again).
Agencies, consultants, freelancers, and any professional who deals in hourly contracts must strike a balance between billable and non-billable activities.
Time tracking software can help manage and gather the billable hours worked, make more accurate invoices, and keep an eye on profitability to assure the health of the business.