Track Billable Hours: How To Do It Accurately in 2023

Effective time management and resource optimization are the foundation of any successful professional service business. An essential component of this is the ability to accurately track billable hours, ensuring that professionals are adequately compensated for their efforts while offering valuable insights into their work patterns. 

To help guide you, this article will examine the intricacies of tracking billable hours, discussing their importance, various methodologies, and the advantages they bring to individuals and organizations alike.

Billable Hours vs. Non-Billable Hours

Before diving into the details of tracking and managing billable hours, it is essential to understand the distinction between billable and non-billable hours. Both terms are critical in the context of professional services, and having a clear grasp of their differences can help professionals and organizations optimize their time and resources more effectively.

Billable hours are the time spent on tasks or projects directly related to client work, for which a professional can charge a client. These hours are typically outlined in a contract or agreement. 

They may include client meetings, project planning, research, design, writing, coding, or any other task that contributes to completing a client’s project. Professionals often charge clients for billable hours at an agreed-upon hourly rate, making it a primary source of revenue for service providers.

Non-billable hours, on the other hand, encompass the time spent on tasks that do not directly contribute to client work and cannot be charged to clients. 

These activities might include internal meetings, administrative tasks, professional development, marketing efforts, or other tasks necessary for running a business but not directly tied to a specific client project. Although non-billable hours do not generate direct revenue, they are crucial for maintaining and growing a business.

Understanding the difference between billable and non-billable hours is important for several reasons, including:

• Resource Allocation: By clearly distinguishing between billable and non-billable tasks, professionals and organizations can better allocate their time and resources, ensuring maximum efficiency and productivity.
• Accurate Billing: Distinguishing billable hours from non-billable hours is vital to ensure clients are billed fairly and accurately for the services provided. This helps maintain transparency, trust, and a healthy client relationship.
• Profitability Analysis: Recognizing the difference between billable and non-billable hours allows organizations to analyze their profitability and make informed decisions about rates, resource allocation, and areas for improvement.
• Time Management: Understanding the distinction between billable and non-billable hours can help professionals manage their time more effectively, focusing on tasks contributing to revenue generation while still allocating time for necessary non-billable activities.

Who Tracks Billable Hours?

While tracking billable hours is relevant to various industries and professions, certain types of employees and businesses will benefit the most from this practice. Professionals who provide specialized services, usually on a project or hourly basis, typically rely on billable hours as a significant source of revenue. 

Some of the most common professionals and businesses that track billable hours include:

• Lawyers: Legal professionals often charge clients based on the time spent on various case-related tasks, such as research, document drafting, consultations, and court appearances. Accurate hour tracking is crucial for law firms and independent attorneys to ensure they are fairly compensated.
• Freelancers: Freelance professionals, including writers, designers, consultants, and developers, typically charge clients on a project or hourly basis. Tracking billable hours allows freelancers to manage their workload, set competitive rates, and invoice clients accurately.
• Contractors: Contractors, such as IT specialists, construction workers, and marketing professionals, often work on a project-to-project basis, making it essential to track billable hours to ensure they’re properly compensated for their time and expertise.
• Accountants: Whether working independently or for a firm, accounting professionals often provide services to multiple clients. Tracking billable hours helps accountants manage their workload, bill clients fairly, and evaluate their efficiency and profitability.
• Consultants: Management, business, and financial consultants often provide specialized services on a project or hourly basis. Accurate tracking of billable hours is essential for consultants to maintain transparency with clients, manage their time efficiently, and ensure fair compensation for their expertise.
• Creative Agencies: Advertising, marketing, and design agencies often charge clients based on the time spent on various tasks, such as brainstorming, designing, content creation, and project management. Tracking billable hours helps these agencies optimize their resources, accurately bill clients, and evaluate the profitability of their projects.

While the aforementioned professionals and businesses are among the most common to track billable hours, the practice can be beneficial for any organization or individual that provides services on a project or hourly basis. 

Tracking billable hours allows these professionals to maintain transparency with clients, manage resources effectively, and ensure they are fairly compensated for their time and expertise.

The Importance of Tracking Billable Hours

Tracking billable hours plays a crucial role in the success of professionals and businesses that provide specialized services. Accurate tracking and management of billable hours offer several benefits, including fair compensation, resource optimization, and improved client relationships. 

There are a few primary reasons why tracking billable hours is important for these employees and businesses, including:

• Fair Compensation: By tracking billable hours, professionals can ensure that they are accurately and fairly compensated for the time and effort invested in client projects. This practice helps prevent undercharging or overcharging clients and maintains a transparent billing process.
• Resource Optimization: Tracking billable hours allows professionals and businesses to analyze how they allocate their time and resources. This insight can help identify areas for improvement, maximize productivity, and ensure that billable tasks receive the appropriate focus and attention.
• Improved Client Relationships: Accurate tracking of billable hours promotes transparency and trust between service providers and clients. Professionals can establish and maintain positive, long-lasting client relationships by providing detailed invoices and explaining the time spent on various tasks.
• Profitability Analysis: Monitoring billable hours enables businesses to evaluate their profitability on a per-client or per-project basis. This information can guide strategic decision-making, such as adjusting rates, streamlining processes, or identifying new business opportunities.
• Time Management: When professionals track their billable hours, they can better understand how their time is spent and make informed decisions about allocating it in the future. This practice contributes to more efficient time management, appropriately prioritizing billable and non-billable tasks.
• Performance Evaluation: For businesses, tracking billable hours can be useful for assessing employee performance and identifying areas for professional development. Understanding how team members allocate their time can inform decisions about workload distribution, training needs, and career advancement opportunities.

How to Track Billable Hours

Tracking billable hours is crucial to managing a successful business or freelance career. To accurately track billable hours, you should follow a systematic approach that includes determining your hourly rate, choosing a method for tracking hours, setting up projects and clients, tracking hours associated with each task, and invoicing for completed work.

1. Determine Hourly Rate: Establishing a competitive and fair hourly rate is the first step in tracking billable hours. Your rate should account for your experience, skills, industry standards, and the value you bring to clients. Researching market rates for similar services or consulting professional associations can provide useful benchmarks for determining your rate.
2. Choose a Method for Tracking Billable Hours: There are various methods to track billable hours, including manual tracking, spreadsheet-based solutions, and specialized time-tracking software. Evaluate the options and choose a method that best suits your needs, considering factors such as ease of use, accuracy, and reporting capabilities.
3. Set up Projects and Clients: Organize your work by setting up projects and clients within your chosen tracking method. This organization will allow you to allocate billable hours to specific tasks and clients, ensuring accuracy and streamlining the invoicing process.
4. Track Billable Hours Associated with Each Task: As you work on client projects, diligently record the time spent on each billable task. Be sure to include all activities that directly contribute to the project, such as research, meetings, planning, and execution. Consistently and accurately tracking your hours will ensure fair compensation and maintain transparency with clients.
5. Regularly Review and Analyze Your Tracked Hours: Periodically review your tracked billable hours to assess your productivity, workload distribution, and overall efficiency. This analysis can help you identify areas for improvement and make informed decisions about resource allocation and time management.
6. Invoice for Work Completed: After completing a project or reaching a predetermined billing milestone, use your tracked billable hours to create detailed and accurate invoices for your clients. Invoices should include the hours worked, tasks completed, associated costs, and any additional expenses or agreed-upon fees. Timely and transparent invoicing promotes trust and fosters healthy client relationships.
7. Maintain Detailed Records: Keep thorough records of your tracked billable hours and related documentation, such as contracts, invoices, and payment receipts. Maintaining organized records will simplify tax preparation, help resolve potential disputes, and support future business analysis.

Following these steps, you can effectively track billable hours and ensure fair compensation, accurate invoicing, and optimal resource allocation. Choosing the right method for tracking hours and consistently maintaining detailed records will contribute to your business’s overall success and profitability.

Methods for Tracking Billable Hours

In the professional world, effectively tracking billable hours is crucial, especially for those who rely on project-based or hourly billing. There are two main methods for tracking billable hours: manual methods, including paper timesheets or Excel spreadsheets, and automated methods, which involve using time-tracking apps or software.

Manual Methods

Paper Timesheets: This traditional method involves manually recording time spent on tasks using paper timesheets. While simple and straightforward, this method is prone to human error and can be time-consuming. Additionally, paper timesheets lack real-time updates, reporting capabilities, and are not easily shareable or accessible.

Excel Spreadsheets: Another manual method consists of using Excel spreadsheets or similar software to track billable hours. Professionals can create customized templates to log time spent on tasks and calculate charges based on their hourly rate. While this method allows for easier calculations and data analysis than paper timesheets, it still requires consistent manual updates and is susceptible to human error. Moreover, Excel spreadsheets lack vital real-time tracking and reporting capabilities.

Automated Methods

Time-Tracking Apps and Software: Automated methods utilize dedicated time-tracking apps or software, like Workyard, to accurately and efficiently record time spent on tasks. Time-keeping software is great for offices and other single-location businesses, while time-tracking apps offer greater flexibility for remote workers. These tools offer numerous advantages, including enhanced accuracy, real-time tracking and reporting capabilities, customizable features, and streamlined invoicing and billing processes.

Advantages of Time-Tracking Apps

Time-tracking apps offer several benefits when it comes to mobile time tracking, efficiency, accuracy, and compliance:

• Mobile Time Tracking: With a mobile app, professionals can track their billable hours on the go, ensuring accurate capture of time spent on tasks even when they’re away from their desks.
• Efficiency: Time-tracking apps streamline the time-tracking process by automating data entry, calculations, and reporting. This allows professionals to focus more on billable work and spend less time on administrative tasks.
• Accuracy: Automated features in time-tracking apps help minimize human error, ensuring that billable hours are accurately recorded and billed.
• Compliance: Time-tracking apps can be configured to support local labor laws and regulations, helping professionals maintain compliance with relevant legal requirements.

While manual methods like paper timesheets and Excel spreadsheets can be used to track billable hours, automated methods like time-tracking apps and software offer significant advantages in terms of mobile time tracking, efficiency, accuracy, and compliance. These tools help professionals optimize their time management, improve their invoicing processes, and ensure fair compensation for their work.

Choosing an App to Track Billable Hours

Choosing the right app for tracking billable hours is crucial for enhancing efficiency, ensuring accurate invoicing, and improving overall time management. 

When selecting the ideal app, it’s essential to consider must-have features such as a user-friendly interface, customizability, comprehensive reporting, integrated invoicing, and robust security and privacy measures. These features contribute to overall ease of use, adaptability to specific needs, data-driven decision-making, seamless invoicing, and improved data protection.

In addition to these core must-have features, there are several key factors to consider during the selection process. The level of automation provided by the app, including automatic time tracking, data entry, or invoicing, is critical, as increased automation saves time and reduces errors. 

A user-friendly and easy-to-navigate app will minimize the learning curve and encourage adoption among team members. Professionals working in areas with limited or unreliable internet access should opt for an app with offline time tracking capabilities.

Compatibility with other tools or systems is another important consideration. Select an app that integrates seamlessly with the tools and systems you already use, such as project management software, accounting platforms, or communication tools, to streamline your workflow and improve overall efficiency. 

Responsive and helpful customer support is a valuable asset that can assist with any issues, questions, or concerns that may arise. Finally, assess the pricing structure of the app, including subscription fees or additional costs for premium features, and opt for an app that offers the features you need at a price point that aligns with your budget.

Taking the time to research and select the right app to track billable hours, considering both the must-have features and key factors, will help optimize your time management, streamline invoicing processes, and ensure accurate tracking of billable hours.

Reasons to Track Billable Hours with Workyard

When it comes to managing billable hours, having a reliable and efficient tool at your disposal is simply invaluable. Workyard, a cutting-edge time tracking solution, has emerged as a popular choice among professionals seeking to optimize their billing process and enhance productivity.

Workyard’s comprehensive time-tracking app is a powerful and user-friendly solution for accurately tracking billable hours. By adopting Workyard’s time-tracking solution, organizations and professionals can optimize their time management and enhance overall efficiency.

There are several reasons to consider utilizing Workyard for your time tracking needs:

• Automate Billable Time Tracking: Workyard’s time tracking software automates the process of tracking billable hours, significantly reducing manual data entry and the likelihood of human error. This increased automation allows professionals to focus more on billable work and less on administrative tasks.
• Track Billable Hours On-the-Go: Workyard’s timesheet app enables users to track billable hours while on the move, ensuring accurate time capture even when away from their desks. This mobile tracking capability is especially useful for professionals who frequently travel or work at client sites.
• Simplify Client Billing: With Workyard, client billing is simplified through the app’s integrated invoicing features. Users can easily create, send, and track invoices based on the recorded billable hours, streamlining the billing process and ensuring timely payments.
• Streamline Payroll Accuracy: Workyard helps to improve payroll accuracy by providing an accurate record of billable hours for each employee or contractor. This information can be used to calculate wages and salaries, minimizing payroll discrepancies and disputes.
• Improve Client Relationships: By providing transparent and accurate records of billable hours, Workyard can help improve client relationships. Clients will be confident in the billing process and reassured that they are being billed fairly for the work completed.
• Ensure Compliance with Labor Laws: Workyard can be configured to support local labor laws and regulations, helping professionals maintain compliance with relevant legal requirements. This feature can be particularly beneficial for businesses that operate in multiple jurisdictions or employ remote workers.

Sign up for a free trial of Workyard today!

Ensure You’re Tracking Billable Hours Properly

Effectively tracking billable hours is essential for professionals who rely on project-based or hourly billing. 

By choosing the right app or software, such as Workyard, professionals can streamline their time management, simplify client billing, and ensure accurate invoicing. With features like automation, mobile time tracking, integrated invoicing, and compliance support, Workyard and similar time-tracking solutions offer significant advantages over more traditional manual methods. 

Investing in a reliable time-tracking solution can help professionals and businesses improve their workflow, enhance client relationships, and focus more on delivering high-quality work, ultimately contributing to the overall growth and success of their business.