Billable hours: What they are and how to calculate them Article

To best mitigate any confusion about billable and non-billable hours, it’s recommended that law firms define the two in a clearly defined legal billing policy. This way, everyone in your firm is on the same page and bills time accurately. Finally, tracking non-billable time gives you a more accurate picture of upcoming capacity. When managers and project leads understand that they can’t book employees at a 100% utilization rate, they’re less likely to burn out their teams. But as we already discussed, you have to track both billable and non-billable time to calculate a reasonable utilization rate for your staff. A billable hours chart is an attorney billable hours template.

• If there’s a lot of training involved with what you do, then those hours should be given more importance.
• Billable hours are usually a pro for the worker rather than the person who has to pay for their rate.
• You won’t overcharge for your services if you know exactly how much time each case requires.
• The number of billable hours depends mostly on the type of industry.
• At the end of the day, we need to change our mindset about non-billable time.

It is standard practice to send invoices monthly but for projects that need more resources, you can work out a bi-weekly schedule with your client. The standard process for calculating billable hours looks something like this. While it might be faster to bill for blocks of time, list tasks separately for accuracy, accountability, and clarity to clients.

Set goals for billable hours

If you’re a law student and haven’t worked in a law firm before, you may be curious about billable hours. The term is thrown around so often (especially during On-Campus Interviews) that it’s almost assumed everyone knows what it means.

For this, it is best to charge a client for the hours worked. Many industries bill their clients based on time, usually based on how many hours they worked. Ranging from law to advertising, several sectors of work use this form of charging a client. Before a business, agency, or freelancer starts working with a client, they must first come to an agreement on the rate charged per hour. Work of higher quality or precision, and done by prestigious or well-established businesses, tend to be more expensive. Tracking your billable hours is just one part of the equation. Third, once you have a total number of working hours, multiply that number by your rate and add any additional fees or taxes necessary to your client’s invoice.

You Can More Objectively Evaluate Your Employees’ Contributions

Depending on the size of the project, this stage can take from a few hours to a few days, which is why it deserves a place on every billable hours chart. As a matter of fact, knowing how to define billable hours and how to work with them can help your teams enter new productivity levels. Tracking both billable and non-billable time helps you understand the true costs of running your business, assign realistic workloads to employees, and provide more value to your clients. You shouldn’t think of non-billable time as time that wasn’t valuable.

Run a successful, client-centered law firm, you need to prioritize your client’s experience. Have clear policies to explain rates and billing practices to clients from the start. Communicating clearly can help manage clients’ expectations regarding billing and payment. This is probably the most obvious and the most difficult way to increase your https://www.bookstime.com/.

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Here’s an example of billable hours from the accounting industry. When an auditor performs an audit of financial statements, they record the number of hours worked on the audit and these hours are then billed to the client. We’re the world’s leading provider of cloud-based legal software. With Clio’s low-barrier and affordable solutions, lawyers can manage and grow their firms more effectively, more profitably, and with better client experiences. We’re redefining how lawyers manage their firms by equipping them with essential tools to run their firms securely from any device, anywhere.

There are many software options out there, designed to aid resource and practice management. This software not only helps offices keep track of billable hours, but also makes other useful tasks easier, like productivity analysis, costing, reports, invoicing, and accounting. TSheets time tracking, you can track time against clients but also against jobs or projects for those clients. Customize your billing with the option to set billable rates, depending on the client or job. Upgrade your account to get job costing features that let you track time against a project’s expected number of hours.

Minding billable time

It is best to track working hours by project separately, even if the different projects belong to one client. Setting a real-time tracker is better than logging hours manually. This method will help you identify who is approaching the work in a way that is too laid back, and those who work overtime and put in too many hours. You will also be able to keep tabs on the project and improve profitability. If you’re a salaried employee or if you spend time working on projects that aren’t billable, it’s important to show how much of your time is spent doing billable work.

On one side, your client won’t be very pleased if they find out you’re billing them for the hour your team spent watching a guy on YouTube eat a 30-foot burrito. Similarly, you won’t be happy if you can’t accurately bill them for the work you did because you didn’t track it accurately. What you should consider with non-billable hours is how much they’re worth to your business. If there’s a lot of training involved with what you do, then those hours should be given more importance. However, if your company works off the old “time is money” adage, then maybe you should find ways to cut down on non-billable hours. When you bill clients by the hour, you need to keep a log of where the time goes so you can bill accurately and make sure your hourly rate isn’t too low. Here’s how you can automate the calculation process and find out the exact amount you need to bill in less than a minute.

How do lawyers keep track of billable hours?

Another example is to look at how long you take invoicing. A more efficient alternative to this is relying on automatic or digital invoicing services. Annoyingly, not everything you work on falls within your core hours. By tracking time spent outside of the office, you may discover you are actually missing out on some hidden billable hours. From business calls you received in the taxi, to late-night work requests and travel for clients, tracking non-billable time ensures you get the complete picture of everything you work on. One study from Affinity Live revealed that US firms could be losing approximately $50,000 each year due to hidden billable time spent on client email. Lawyers, like freelancers, typically have a large number of clients that they’re juggling at once.

If you use a cloud-based accounting solution, you can easily track your billable hours using its time-tracking feature. You’ll simply have to start the digital timer in your accounting software and assign the time to the relevant client. There are a few reasons why tracking billable hours makes sense for your business. 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.