What's the difference between billable and non-billable?
An hour is billable if you can put it on an invoice. It’s not about how hard you worked, but what you agreed with the client. A design round within the engagement is billable; writing a quote for the same client usually isn’t.
Non-billable hours keep your business running, but you pay for them out of the margin on your billable hours. That’s why it’s important to know how many you have.
| Usually billable | Usually non-billable |
|---|---|
| Delivery work within the engagement | Quotes and sales |
| Meetings with or for the client | Your own admin and invoicing |
| Research the client asked for | Internal meetings and training |
| Travel time, if agreed | Rework caused by your own mistakes |
How do you calculate billable utilization?
The formula is simple: billable hours ÷ hours worked × 100%. Use hours actually worked, not contracted hours, or a week with overtime will look better than it really was. Don’t include holidays or sick days.
It also helps to track the gap between billable and actually invoiced hours. Hours that were billable but not charged—maybe because a job ran over—are a different kind of loss.
- Example: you work 40 hours in a week.
- 28 of those are billable under your agreements.
- Your utilization is 28 ÷ 40 × 100% = 70%.
- You end up invoicing 25, because you write off 3 hours of extra work. So 25 ÷ 28 ≈ 89% of your billable hours were actually invoiced.
This is just an example, not a benchmark. What’s healthy depends on your field, your role, and how much time you spend on sales and management.
Where does billable time slip away?
Almost never in the big blocks. A full day on site or an afternoon coding gets logged. The loss is in the small tasks in between, which you forget by the end of the week.
- Short calls. Ten minutes with a client about a question, three times a day, is half an hour that disappears.
- Email. A detailed reply or proofreading a document is work for that client, but doesn’t always feel like ‘project work’.
- Follow-up. A small change after delivery, a question about an invoice, a quick check.
- Travel. If you agreed travel time counts, you need to log it too.
- Context switches. Work you pause and finish later often only gets logged once.
How do you set rates: by activity, project, client, or person?
Many time trackers use a rate hierarchy: the most specific rate applies. A rate for a type of work overrides a project rate, which overrides the client’s rate, and so on down to your default rate.
That way, you don’t have to pick a rate for every entry. You set a default and only record exceptions: a client with a special discount, a project with a fixed hourly rate, or work that always has its own rate.
| Level | When to use it |
|---|---|
| Type of work (activity) | Work with its own rate, like consulting vs. delivery |
| Project | A quote with an agreed hourly rate for that project |
| Client | A master agreement or discount for all work for that client |
| Person | Senior and junior staff at different rates |
| Organization | Your default rate when nothing else applies |
How do you agree with clients on what’s billable?
Put it in writing before you start, in the quote or engagement letter. Invoice disputes almost always come from work the client didn’t expect to be billed.
Be specific about the gray areas. Does travel count, and at what rate? Do you round to fifteen or six minutes? Is your team’s internal discussion about their project billable? Do you charge for fixes after delivery?
Write a short description on every entry that the client could read. Then the breakdown on your invoice is your justification. More in Invoicing from hours.
How Half5 does it
In Half5, the activity decides if an hour is billable: each activity is set to "Billable" or "Non-billable". An entry without an activity counts as billable. Projects and clients don’t have their own billable switch, so for internal work you create a non-billable activity, like ‘Admin’ or ‘Sales’.
Rates are applied in this order: activity → project → client → user → organization. An activity can have its own "Hourly rate", which overrides your default rate. A project shows registered hours, budgeted hours, budget used, and the billable amount. The reports include a view of work still to invoice and a profitability view comparing rates with costs.
For the small tasks that slip away, the desktop app can help: your timeline shows programs you worked in, calendar events, and files as "Suggestions" to log. Programs and files are end-to-end encrypted, and calendar events are visible only to you: your manager, admins, and Half5 can’t read any of it. Your organization only sees the hours you log yourself. See automatic time tracking.
Frequently asked questions
What’s a good billable utilization?
There’s no set standard. It depends on your field and your role: someone who also does sales or management will naturally have more non-billable hours. Compare mainly to your own previous months.
Do holidays and sick days count in utilization?
Usually not. You divide billable hours by hours worked, and leave isn’t hours worked. Make sure your company agrees on one definition, or you’ll be comparing different things.
Should I record non-billable hours at all?
Yes, if you want to know what your time really costs. Without them, you can’t see how much of your week goes to admin or sales, and you can’t justify your rate properly.
Is travel time billable?
Only if you agreed on it with the client. Many businesses charge travel at a lower rate or a fixed amount per trip; put it in the quote up front.
How is utilization different from productivity?
Utilization is about what share of your hours you can bill. Productivity is usually broader. How to measure it without monitoring people is in productivity without surveillance.
