What's the difference between billable and non-billable?
An hour is billable if you can put it on an invoice. That doesn't depend on how hard you worked but on 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 aren't worthless. They keep your business running. But they're paid for out of the margin on your billable hours, so you want to know how many there are.
| 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 utilisation?
The formula is simple: billable hours ÷ hours worked × 100%. Use hours worked, not contract hours, or a week with overtime looks better than it was. Leave holidays and sick days out of the sum.
It also helps to track the gap between billable and actually invoiced. Hours that were billable but that you didn't charge, for example because a job overran, are a separate kind of leak.
- Example: you work 40 hours in a week.
- 28 of them are billable under your agreements.
- Your utilisation 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 a worked example, not a benchmark. What a healthy share is depends on your field, your role and how much time sales and management take.
Where does billable time leak away?
Hardly ever in the big blocks. A day on site or an afternoon of coding gets written down. The loss is in the small work in between, which you no longer remember 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's nowhere.
- Email. A detailed reply or proofreading a document is work for that client, but doesn't feel like ‘working on the project’.
- Follow-up. A small change after delivery, a question about an invoice, a quick check.
- Travel. If you agreed travel time counts, you have to record it too.
- Context switches. Work you interrupt and finish later often gets logged only once.
How do you set rates: per activity, project, client or person?
Most time trackers use an order of rates: the most specific rate wins. A rate for a type of work beats a project's rate, which beats the client's rate, and so on down to your default rate.
That way you don't pick a rate per entry. You set a default and only record exceptions: a client with an agreed discount, a project with a fixed hourly price, or work that always has its own rate.
| Level | When to use it |
|---|---|
| Type of work (activity) | Work with its own price, such as advice versus delivery |
| Project | A quote with an agreed hourly rate for that project |
| Client | A framework agreement or discount for everything you do for them |
| Person | Senior and junior staff at different rates |
| Organisation | 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 are almost always about work the client didn't know would count.
Be specific about the edge cases. 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 specification with your invoice is your justification. More in Invoicing from hours.
How Half5 does it
In Half5 the activity decides whether an hour is billable: each activity is set to "Billable" or "Non-billable". An entry without an activity counts as billable. Projects and clients have no billable switch of their own, so for internal work you create a non-billable activity, such as ‘Admin’ or ‘Sales’.
Rates are resolved in the order activity → project → client → user → organisation. An activity can have its own "Hourly rate", which overrides your default rate. A project shows registered hours, budget 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 work that leaks away, the desktop app can help: your timeline shows programs you worked in, calendar events and files as "Suggestions" to register. That timeline is private; your organisation only sees what you register yourself. See automatic time tracking.
Frequently asked questions
What's a good billable utilisation?
There's no fixed standard. It depends on your field and role: someone who also sells or manages naturally has more non-billable hours. Compare mainly with your own previous months.
Do holidays and sick days count in utilisation?
Usually not. You divide billable hours by hours worked, and leave isn't hours worked. Do agree on one definition within your company, or you'll be comparing different things.
Should I record non-billable hours at all?
Yes, if you want to know what your time 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 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 utilisation different from productivity?
Utilisation is about which share of your hours you can charge. Productivity is often used more broadly. How to measure it without monitoring people is in productivity without surveillance.
