Billable Hours Explained: A Complete Guide to Client Time

Billable hours means the work hours you spend on client projects that you can charge for. They’re how lawyers, consultants, agencies, accountants, and freelancers turn their time into money.

But here’s the thing: Most professionals struggle to track billable hours properly. They forget to log time, mix up billable and non-billable work, and don’t exactly how much time to bill.

This guide to billable hours covers everything you need to know about billable time. You’ll learn what counts as billable work, how to calculate your billable rates, what are the best time tracking tools, and smart ways to increase your billable time without working more hours.

Key Takeaways

• Tracking billable hours in with a Billable Hours Tracker in real-time increases your billable hours by 20-30% compared to logging time later.
• Spend 60-80% of your work hours on billable tasks. Use the rest for business operations and growth.
• Automated billing processes can save time and reduce errors in invoicing clients.
• Regular auditing of time logs helps in catching mistakes and identifying inconsistencies.

Don’t miss a billable hour again!

“I have been using EARLY for almost 2 years now. It helped me keep track of my time, the billable hours to customers and gain business” – Fabian G., CTO

Try EARLY for free

What Are Billable Hours?

Billable hours are the time you spend doing work for a client that you can charge them for. They’re billed at your set hourly rate and help calculate the total project cost.

What does “billable” mean? It means you can put this work on an invoice. Bear in mind though that not everything you do for a client is billable. Fixing your own mistakes, quick scheduling emails, and general relationship maintenance usually aren’t.

The term “billable hours” originates from the legal field – you’d typically associate it with professionals like attorneys, paralegals, and legal consultants. However, billable hours also apply to many other service providers, such as:

• Freelancers: Writers, designers, developers, and other specialists working by the hour

• Consultants: Business advisors, IT exerts, and strategy consultants charging for their expertise

• Agencies: Marketing, advertising, design, and digital agencies billing for creative work

• Accountants: CPAs and bookkeepers charging for tax prep, audits, and financial services

Recommended article: Billabile utilization

Difference between Billable and Non-Billable Hours

Should you bill a client for the 10 minutes you spent exchanging messages on Slack? What about the hour you spent fixing a mistake you made? Should you bill for all the hours you work?

That’s where understanding the difference between billable vs non-billable hours comes in.

Billable hours are the time you spend working directly on client projects during your billing cycle. This is the work that moves their projects forward and falls within your client contracts.

Non-billable hours are the time spent on tasks you can’t charge clients for. These usually keep your business running but don’t bring direct value to a client – things like admin work, fixing your own mistakes, or learning new skills.

So, what counts as billable and what as non-billable activities?

As a rule of thumb: If the task brings value to the client and is part of your agreed scope of work, it’s billable time. If it supports your business but not a specific client, it’s non-billable time.

Here are some examples to illustrate the difference.

For more information, check out the article Billable vs. Non-Billable Hours.

Billable Hours vs. Actual Hours

Not only the distinction between billable vs non-billable hours is important but also the one about billable hours vs actual hours.

Actual hours are all the work time you put in during a day, week or month. This includes client service, admin tasks, meetings – everything. If you work an 8-hour day, those are your actual hours.

Billable hours are only the hours you can invoice to clients. Just the revenue-generating work.

The gap between actual hours and billable hour is your billable utilization rate. This is one of the most important numbers for your business.

How to Calculate Billable Hours

Calculating billable hours means tracking the time you spend working on client projects. This is where the project billing process starts.

There are several ways to do this, but bear in mind: The method you choose affects the accuracy and revenue.

Methods for Tracking Billable Hours

1. Real-Time Tracking with Software

Use time tracking software to record billable time as you work. This is the most popular method among modern consultants and agencies because it automatically captures all the time spent on client projects – to the minute!

Learn how an agency increased their revenue by 25% by billing their time with EARLY

The benefits? Accurate time reports, no manual work, and data always ready for accurate invoices.

How it works:

• A time tracking app automatically tracks time spent on specific tasks, projects and clients – no need to manually start or stop a timer.
• Automatic time tracking software calculates the total number of billable hours for each project – no advanced math skills required from your side.
• Time tracking app applies your hourly billable rates and automatically calculates the amount to be invoiced – no manual calculations needed.

Important: Tracking time in real time can increase your billable hours by 20–30% compared to logging time later. Simply open the app when you start working and close it when you’re done – this way, all your work hours and billable time will be saved for accurate reporting.

Maximize your revenue by tracking every billable minute with specialized tools

“Was I really undercharging that much? It was an eye opener to actually see how much these hours of – it’s only a quick job – added up.” – Debi H., Digital Marketer

Try for free

2. Manual Time Entry

Write down your billable hours throughout the day in a spreadsheet or on paper, then calculate how many billable hours you spent for a particular client.

It may seem simple, but it’s not. I wouldn’t encourage you to take this path, as it comes with several drawbacks:

• It makes the time tracking process unnecessarily time-consuming.

• Managing billable hours manually is error-prone, especially if you need to track time for multiple projects.
• It adds to your administrative work.

How it works:

• Keep a notepad or spreadsheet handy.
• Log your activities as you complete them (start time and end time).
• Calculate total billable hours manually or use a spreadsheet formula to see how many hours you spent on each project.

Important: Recording time right after finishing a task gives you the most accurate results. If you wait, it’s easy to forget how long something actually took – and you’ll likely underestimate your hours which leads to underbilling.

Free templates: Download your free billable hours chart below.

• Daily billable hours template
• Weekly billable hours template
• Monthly billable hours template
• Daily attorney billable hours chart (24-hour)
• Weekly attorney billable hours chart
• Monthly attorney billable hours chart

Learn more about the manual method of tracking billable hours in the article: Manual Timesheets: Why It’s High Time to Ditch It.

Time Increments in Billable Hours

Once you know how to track hours spent on client project, you need to decide how to round it for billing. Most professionals use standard time increments rather than billing exact minutes. This ensures consistency and fairness.

For example, common standard time increments for tracking billable hours in legal services are six-minute intervals (0.1 hours), though practices vary by industry:

Common increments:

• 6-minute increments (0.1 hours): Standard in many law firms.
• 15-minute increments (0.25 hours): Common in consulting.
• 30-minute increments (0.5 hours): Used by some freelancers.
• 1-minute increments: Possible with modern software for exact tracking.

Why use increments?

Think of it like parking rates. You don’t pay for exactly 23 minutes of parking – you pay for 30 minutes or an hour. Billable hours work the same way.

Example: If you spend 7 minutes on a client call, you bill for the nearest increment (usually 12 minutes). This makes tracking easier and billing simpler. It also recognizes that short tasks take longer than the actual work – you have to stop what you’re doing, handle the task, and get back into focus.

How to Calculate Your Total Billable Hours Manually

Step 1: Billable time tracking. Make sure to diligently track your time spent on client tasks (for each project separately). Record every billable moment, ideally with a time tracking app that does it automatically.

Example (weekly billing cycle):

• Client phone calls: 2 hours
• Research: 3 hours
• Creating deliverables: 5 hours
• Client revisions: 1.5 hours

Make sure not to include hours spent on administrative tasks that don’t belong to your client’s work scope.

Step 2: Add it all up.

Total billable hours = 2 + 3 + 5 + 1.5 = 11.5 hours

That’s your billable hours for this project.

Step 3: Calculate what to invoice. Once you know your billable hours, multiply by your rate to get the invoice amount:

Total Invoice = Billable Hours × Hourly Rate

Example:

• Billable hours: 11.5 hours
• Your rate: $100/hour
• Invoice amount: 11.5 × $100 = $1,150

💡 Pro Tip: If you’re using EARLY, add your hourly rate to each activity, and it will automatically calculate the total number of billable hours for your invoices.

How to Calculate Billable Hourly Rate

Setting your hourly rate isn’t just about what you want to earn. You need to cover business expenses, taxes, non-billable time, and still make a profit. How to approach that and calculate a fair rate?

Use this simple formula:

Hourly Rate = (Desired Annual Income × 1.5 to 2.0) ÷ Annual Billable Hours

The multiplier (1.5 to 2.0) covers your yearly expenses, taxes, and profit margin.

Example calculation:

• Want to earn per year: $100,000
• Multiplier: 1.7
• Expected billable hours per year: 1,400
• Your hourly rate: ($100,000 × 1.7) ÷ 1,400 = $121/hour

Once you have your calculated rate, check it against market realities to make sure it’s competitive and reasonable for your industry.

How to validate your rate:

• Research what others in your field charge.
• Adjust for your experience level and location.
• Test with clients and adjust as needed.
• Review annually and increase rates by 5-15%.

How Many Billable Hours in a Year (or Month)?

How many billable hours should you aim for in a year? Or in a month? The answer depends on your industry and role, but knowing realistic targets helps you plan your business and set the right rates.

Typical annual targets by profession:

• Lawyers: 1,500-2,200 hours/year depending on firm size
• Consultants: 1,400-1,800 hours/year
• Agencies: 1,200-1,500 hours/year
• Freelancers: 1,000-1,500 hours/year
• Accountants: 1,400-2,000 hours/year (varies by season)

Quick monthly breakdown:

If you work 40 hours/week with a 70% utilization rate, you’ll hit about 115 billable hours per month or roughly 1,400 hours per year.

Remember, aiming for 60-75% utilization is sustainable. Pushing for 80%+ often leads to burnout. Setting daily goals for billable hours makes it easier to keep track of progress toward annual targets.

Why you should track billable hours

Since you’re invoicing the hours worked, the first thing that comes to mind is simple: send invoices and get paid.

But the reality is that tracking the time that literally turns into money for your business reveals a lot more. It helps you see whether your estimated time for projects is realistic and what’s actually eating into your billable time – the time wasters that hold your business back.

Let’s look at a few other reasons why tracking billable hours is so valuable:

• 💰 For the financial benefits: Whether you run a small or large business, being paid for every minute of client work is only fair. It keeps your cash flow healthy, covers expenses and salaries, and prevents revenue leakage that might otherwise go unnoticed.

• 🥸 To prevent underbilling: It helps you capture every billable activity – quick client phone calls, short email responses, and minor revisions that often slip through the cracks but add up fast.
• 🔖 To get a sense of profitability and pricing: Tracking billable hours helps you see how long tasks actually take compared to how much you’re charging. You’ll quickly spot where costs can be reduced and how to improve resource allocation.
• 😌 To prevent burnout: Keeping a close eye on billable hours helps you understand your workload and utilization rate. If you’re consistently billing 80% or more of your available hours, it’s a sign you might be overworked – and that pace isn’t sustainable long-term.
• ⚙️ To improve your operations: You can identify workflows that can be streamlined and strengthen your capacity planning and overall client billing process.

• 👔 To build stronger client relationships: Transparency builds trust. Showing clients the effort behind your deliverables not only reinforces the value of your work but also helps prevent price disputes.
• ⏱️ To manage your time better: Keeping tabs on billable hours increases awareness of how you prioritize tasks and highlights how to improve your time allocation.

How to Increase Billable Hours

The key to higher profitability isn’t necessarily working more hours – it’s working smarter. Strategic approaches to your time management can dramatically increase your billable capacity without extending your workday or risking burnout.

Many professionals assume that increasing billable hours means sacrificing personal time or working nights and weekends.

In reality, most businesses have significant untapped billable capacity hidden within their current working hours. By reducing inefficiencies, automating non-billable tasks, and optimizing workflows, you can substantially increase revenue without increasing total work hours.

Here are some quick strategies that work:

1. Batch similar tasks to minimize context-switching

Context switching (moving between different types of tasks) can cost you up to 40% of your productive time. When you jump between different clients or project types, your brain needs time to reload the relevant information and get back into flow. This way, you’re basically wasting time on non-billable tasks.

What to do?

• Dedicate specific days or chunks of the day for specific clients or project types.
• Block 90-120-minute focused sessions for single-client work and block all notifications. Customize your notifications so that only emergencies can get to you.
• Group similar activities (all research, all writing, all design) across projects in chunks of time, and try to stay away from jumping from one to another.
• Process all client comms during dedicated time blocks.

Batching similar tasks is the first step to block billing – a method of tracking billable hours where you consolidate multiple tasks into a single one and bill them together.

2. Use a time-tracking software to track everything for you

You won’t know if you’re reaching your billable potential as a company unless you have an objective time audit at hand, based on which to make decisions of simplifying or changing your workflow entirely. If you believe you have poor time management within your team, you need a report to surface that and start slowly changing work habits to capture more billable hours.

What to do?

• Create standardized task categories across all projects inside the time tracking software.
• Configure automated reminders to track time throughout the day.
• Schedule weekly reviews of non-billable tasks.
• Use the reporting features to identify productivity patterns.

3. Template recurring deliverables to reduce production time

Why recreate what you’ve already done well? Templates save tremendous time while these help you keep consistency across your work.

What to do?

• Create standardized project kickoff docs, create reusable sections for reports and proposals, and put them all in a library.
• Build standard meeting agendas and follow-up formats, create modular content blocks that can be customized quickly, and document your processes to streamline repetitive workflows.

4. Set daily or weekly billable hour targets to stay on track

It’s as simple as the saying: What gets measured, gets managed. Also, once you know where you’re heading, you’ll be motivated to reach that objective, while these targets create accountability within your team.

What to do?

• Start by calculating your ideal monthly billable hours and divide them by working days and weeks.
• Set progressive targets that increase gradually, and create visual trackers so that your team monitors progress.
• Review the performance weekly to identify patterns, opportunities and if there’s anything to adjust.

5. Take on more tasks from your current clients

It sounds obvious, but logically, if you can expand your service offerings with existing clients, it’ll be much easier to reach your billable hour goals. Clients who already know and trust your work are more likely to engage you for additional work. This strategy is even better than acquiring more clients, as there’s no acquisition cost on your side.

What to do?

• Structure your retainer agreements to include regular strategy sessions, and in these sessions and audits with clients, identify unaddressed needs or pain points you could solve.
• Create a “menu of services” document highlighting your full capabilities, and from time to time, offer small “trial” projects for new service areas to build client confidence.

6. Raise your rates

Last but not least, increasing your hourly rates is often the most direct way to increase business profitability without working additional hours. Strategic rate increases allow you to earn more while potentially taking on fewer, higher-value projects.

What to do?

• Do research on current market rates for your expertise and experience level to make sure you’re raising your rates fairly.
• Segment your client base, consider different rates for different client types, and announce rate increases with advance notice (30-90 days) to existing clients.
• Clearly communicate the added value that justifies your new rates, but also consider grandfathering long-term clients at slightly lower rates.
• Implement these increases gradually (5-15%) rather than dramatic jumps.

For detailed strategies with step-by-step implementation guides, check out our complete article on increasing billable hours.

Billable Hours in the Legal Industry (Attorney Billing)

The legal profession has a unique relationship with billable hours. Unlike other industries, billable hours in law aren’t just a financial metric – they’re built into the profession’s ethical and regulatory framework.

Attorneys are bound by ABA Model Rule 1.5, which requires fees to be reasonable and supported by accurate time records. Falsifying or inflating time entries can lead to disciplinary sanctions or even disbarment. This makes timekeeping a matter of legal compliance, not just internal accounting.

Billable hour requirements

Law firms require minimum billable hour targets that attorneys need to hit each year. These aren’t just suggestions – they’re tied to compensation, bonus eligibility, and chances of making partner. Consistently falling short can mean missed bonuses, lower performance reviews, or job loss.

Targets usually vary by firm size:

• Large law firms (AmLaw 100): 1,900-2,200 hours/year
• Mid-size firms: 1,700-1,900 hours/year
• Small firms and solo practices: 1,200-1,600 hours/year

You might find it interesting: Lawyers often work long hours but only bill around 30% of the time they actually work due to administrative and other non-billable tasks.

How legal professionals track billable hours:

Many law firms record work in six-minute increments (0.1 hour), which is a convention standardized across the legal profession. A 7-minute client call, for example, is billed as 0.2 hours.

Each time entry must include a clear, detailed description (like “Draft response to motion for summary judgment” rather than just “research”).

Recommended: For more information, read the article about how lawyers track billable time.

Attorney billable hours charts

If you are still at law school or don’t have access to a time management software, try the free time billing templates to track your billable hours:

• Daily attorney billable hours template (24-hour)
• Weekly attorney billable hours template
• Monthly attorney billable hours template

Challenges of Billable Hours and How to Solve Them

While billable hours provide a straightforward way to charge clients and generate revenue, this business model creates significant challenges for both professionals and firms. Understanding these challenges helps you implement strategies to mitigate negative impacts while maintaining profitability.

1. Burnout and Work-Life Balance

The pressure to meet billable hour requirements can lead to burnout and mental health issues among employees. When firms set aggressive targets, professionals often work 60-70+ hour weeks to hit their numbers.

The problem gets worse when many firms implement a punitive culture around billable hours that can heighten employee stress and dissatisfaction. This creates an environment where billable hour requirements can discourage employees from taking vacations or sick leave, leading to negative health outcomes.

Signs of trouble:

• Working long hours but only billing 30% of actual time due to admin tasks
• Feeling pressure to skip vacation or sick days
• Chronic stress about meeting quotas

What helps:

• Set realistic targets (60-75% utilization)
• Create supportive cultures, not punitive ones
• Encourage time off and enforce boundaries

2. Tracking Confusion and Revenue Loss

Many professionals struggle to distinguish between billable and non-billable work. This leads to either underbilling (losing money) or overbilling (creating disputes).

Common problems:

• Forgetting to track brief tasks
• Unclear policies on what’s billable
• Delayed time entry causing underestimation

Solutions:

• Track time immediately – it increases captured billable hours by 20-30%
• Use time tracking software with automated reminders
• Create clear policies defining billable vs. non-billable work

3. Client Trust Issues

Hourly billing can create tension with clients who worry about paying for inefficiency or padded hours.

What damages trust:

• Vague time descriptions like “research”
• Unexpected bills much higher than estimates
• Rounding up every small task

How to build trust:

• Write detailed descriptions (“Researched Colorado non-compete law”)
• Communicate billing policies upfront
• Give regular budget updates
• Be willing to adjust or discount when appropriate

Guide to Billable Hours: Bottom Line

It’s quite clear that staying on top of your billable hours is vital for your business, especially for service-based professionals who want to build sustainable, profitable businesses.

Whether you’re a seasoned consultant or just starting your freelance journey, understanding how to properly track, optimize, and leverage your billable time directly impacts your bottom line.

By implementing the strategies outlined in this guide you’ll transform your approach to billable hours from a necessary administrative task into a powerful business optimization tool.

FAQ