In a hybrid or remote setting, it becomes all the more daunting to track employees’ billable hours. It is crucial because it tracks the productivity of employees. In simple terms, billable hours are the number of hours an employee works that are billed to the client.
- According to AffiniPay, law firms that consistently track billable hours capture up to 11% more revenue compared to firms with inconsistent time tracking.
- A report by TSheets (now part of QuickBooks) found that businesses lose up to 20% of billable time due to manual time tracking errors.
Tracking billable hours isn’t just a good practice; it builds trust in your clients that you are invoicing fair compensation for work done.
What are the benefits of tracking billable hours?
The question that arises is, why should you track billable hours?
A fair answer is it offers:
- Transparent revenue tracking : Professionals can forecast revenue by estimating hours × hourly rate.
- Fair compensation for time spent : Your employees are paid for actual time spent.
- Flexible for open-ended work : When the scope of a project is undefined, hourly billing protects professionals from underpricing.
- Adjusting rates over time : You can raise hourly rate as your teams’ experience grows and specialization deepens.
- Detailed time management : Tracking billable hours increases productivity awareness.
What are some common modes of billable hours tracking?
There are multiple modes of tracking billable hours. They are:
- Manual timesheets: This is when time or billable hours are recorded via paper or spreadsheets.
- Digital timers: These are timesheet tools that run in the background while working.
- Project management tools: These are tools like Trello or we360.ai with built-in time tracking features.
- Billing software: These are automated systems that directly connect time tracked to invoices.
What are the best ways to track billable hours as per business size?
- Freelancers: Spreadsheets (like Microsoft Excel or Google sheets) and invoicing tools like FreshBooks.
- SMBs: These need a dedicated time and invoicing system like Harvest or QuickBooks online. This asserts time entry categories and weekly approval of timesheets.
- Enterprises: These are for complex client contracts in multi-location compliance. Tools include SAP S/4HANA, Oracle NetSuite, Workday and Deltek.
Here’s a table breaking down how complex measuring billable hours is based on business size:
Ways to calculate billable hours
- Total billable hours:
Total Billable Hours = Sum of all client-billable time logged
- Revenue calculation:
Revenue = Billable Hours × Hourly Rate
- Billable utilization rate:
Utilization Rate (%) = (Billable Hours ÷ Total Available Work Hours) × 100
- Realization rate:
Realization Rate (%) = (Billed Hours ÷ Recorded Billable Hours) × 100
- Effective hourly rate:
Effective Rate = Total Revenue ÷ Total Billable Hours Worked
- Revenue per employee
Revenue per Employee = Total Revenue ÷ Number of Employees
- Break-even billable hours
Step 1: Required Revenue = Expenses + Target Profit
Step 2: Required Billable Hours = Required Revenue ÷ Hourly Rate
- Project-based billable hours estimate:
Estimated Hours = (Task 1 + Task 2 + Task 3…) + Buffer (10–20%)
- Write-Off & Write-Up Calculation
Write-Up = Invoiced Amount − Recorded Billable Amount
- Blended rates
Blended Rate = Total Revenue ÷ Total Billable Hours (team)
How does we360.ai optimize client work time?
Now that we know how to calculate billable hours and why it’s pivotal, let’s understand how we360.ai optimizes client work time by tracking real-time employee activity, monitoring app usage, and analyzing productivity patterns. It identifies time leaks, reduces idle hours, and improves task focus. Managers get clear dashboards and actionable insights. Teams deliver faster results, meet deadlines, and improve overall operational efficiency.
In order to track billable hours accurately, book a FREE DEMO with we360.ai now!
