Why are billable hours important?

Asked by: Miss Elda Murray DDS  |  Last update: December 17, 2023
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The importance of tracking billable hours
The most obvious reason is that it helps you figure out how much to charge clients. Knowing how long it takes you to complete a project helps you set an hourly rate that allows you to make money and run a sustainable business.

What is the purpose of billable hours?

Billable hours are the amount of time spent working on business projects that can be charged to a client according to an agreed upon billing rate. Businesses, agencies, entrepreneurs and freelancers all frequently use billable hours to charge clients for the services they provide.

What are the cons of billable hours?

One downside to billing clients hourly is that some professionals may feel pressure to work more hours than they can work to get the desired amount paid. This can lead to fatigue and other health problems, as professionals work long hours without breaks.

Do I get paid for non-billable hours?

Instead of thinking of non-billable hours as time you can't get paid for, you should think of it as an investment in your organization's future. You won't get paid directly for it, but the non-billable effort you put in now will help you increase profits and grow your business over time.

How much of your time should be billable?

The commonly-held estimate of billable time lies somewhere between 60-80 percent, which is known as the utilization rate. While that range may seem large (it is) and anything under 80 percent may sound low (it does), non-billables vary by industry, and many tasks deemed non-billables actually help companies grow.

The Billable Hour: Why Big Law Just Can't Quit It

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How many hours a week to hit 2000 billable hours?

Whether the goal is weekly, monthly, or yearly, if you're not tracking your time, you may not realize you're too far behind to catch up until it's too late. For example, if you want to reach a goal of 2,000 hours annually, you would need to bill for roughly 40 hours each week, or eight billable hours a day.

How many billable hours are normal for a week?

But the reality is you're probably not billing a full 8 hours per day. We surveyed 100 companies and found that most service-based companies that bill hourly require employees to bill at least 31 hours per week. 52 weeks x 31 hours = 1612 required billable hours by most companies in one year.

Why are billable hours bad?

It forces us to make too many time- value judgments that too often are based purely on whether an activity is billable. It forces people away from real life and into a world where everything is billable (important), or not (not important). If it's not billable, it better be very important.

Are phone calls billable hours?

As previously mentioned, billable hours are the work hours spent on assignments you can bill directly to your client. These hours need to be carefully documented so you know what to bill clients for your services. Here are examples of work that should be tracked as billable hours: Client meetings and phone calls.

Do you include breaks in billable hours?

Non-billable hours also include activities that employees do for their own benefit, for example, taking a 5-minute break to freshen up, or eating. These activities are not directly related to work tasks but contribute to the employee's total hours.

What is the industry standard for billable hours?

Time is money—especially when it comes to how many billable hours in a year an attorney can accumulate. Thankfully, using a billable hours chart can help. Lawyers work hard, and they work a lot. Many firms expect attorneys to reach minimum billable hour requirements ranging between 1,700 and 2,300 hours per year.

How many hours is 3000 billable hours?

Actually, to bill 3000 hours would mean “billing” eight hours a day, every day of the year. However, having eight billable hours a day usually means you need to work about 12-14 hours a day, every day of the year.

Which is better billable or non-billable?

The advantage of billing time to clients with set billing rates is that it gives your client a clear picture of how you spent your time and why it is worth their money. Tracking hours you're billing also ensures you will be paid for any overtime hours worked.

How much do top lawyers charge per hour?

The hourly fee attorneys charge could range from as low as $50 or $100 per hour to as high as several thousand dollars per hour for specialized legal work performed by a top professional. According to the Clio 2022 Legal Trends Report, the average attorney hourly rate was $313.00 in 2022.

How can I increase my billable hours?

10 Tips to Increase Billable Hours on Projects
  1. Define the Exact Scope of Your Work.
  2. Specify What is Not Included in the Scope, too.
  3. Define When Your Service Ends.
  4. Make Sure that the Client Understands What You Do for Them.
  5. Increase Transparency in Time Billing.
  6. Use an Easy System to Track Billable Hours.

What is the difference between billable hours and regular hours?

Billable hours represent the amount of time employees have spent on tasks that are invoiced to clients. Non-billable hours are the hours spent on tasks that don't get invoiced. They are most often dedicated to different internal tasks.

What are acceptable hours to call?

On weekdays, it's safe to assume that you can call in the earlier morning hours, around 8 a.m. or 9 a.m. However, on weekends, wait until at least 10 a.m. to allow much-needed rest and relaxation, as well as a leisurely morning routine.

What are some non billable tasks?

Non-billable hours are the work hours you spend which are not going to be directly charged to the client. Some examples of non-billable work hours are things such as team meetings, staff development/training, or networking and attending conferences.

What is an example of a billable hour?

Billable hours are quite simple; these are the ones you charge your clients for work directly done on their projects; for example, the hours of a developer working on a new webpage, administrative work, or other project activities.

How many billable work hours in a year?

260 days x 8 hours = 2080 billable hours in a year. However, bear in mind that the value may vary depending on the local public holidays and working days for your company. If your business operates on the weekends and holidays too, you may add some working days to the equation.

How are billable hours charged?

Billable hours refer to the hours an individual works that they can charge to a client. The work conducted during those hours must be on behalf of the client. They cannot include any hours spent doing non-project-related tasks. Typically, they reach an agreed hourly rate with the client before starting the project.

How many hours should I bill a day?

As a general rule, if you bill between 36 and 40 hours in a week, you're likely going to be okay. Over the long run, the expectation is that you should be averaging 40 billable hours a week - assuming you have productive work to do.

What is the 6 minute increment billing?

Most attorneys use 6-minute increments (one-tenth of an hour) for clarity and efficiency during invoicing. Billing in smaller increments is time-consuming and laborious, while manual calculations are prone to human error.

How many billable hours is 1800?

If the goal is to work 1800 billable hours each year, that translates into 2420 total working hours, without taking any sick or personal days or accounting for the commute, with a 10 hours workday.

What is the ratio of billable hours to salary?

3:1 is a standard billing rate to salary ratio in consulting and other professional services firms. This standard is also known as the "rule of thirds", as the billing rate includes one-third salary, one-third overhead and one-third profit. How is budget billing calculated?