Billable vs non-billable hours: a plain guide

If you sell people's time, whether as an agency, a trades business, a consultancy or a cleaning company, not every hour you pay for is an hour you can charge for. The difference between the two decides whether a busy month is also a profitable one. This guide explains the terms in plain English, shows the two sums worth doing, and suggests what to change when the numbers are not what you hoped.

The two kinds of hours

A billable hour is one you can charge to a client: doing the work they hired you for. A non-billable hour is one you pay for but can't put on an invoice: writing quotes, team meetings, training, fixing your own equipment, doing the accounts.

Both are real work. The point of separating them is not to label one good and one bad. It is to know how many paid hours actually bring in income, so that your prices and your plans are based on that number and not on the total.

Decide the grey areas once

Most arguments about billable time come from a handful of repeat cases. Settle them once and write the answers down, so that two people doing the same work record it the same way.

• Travel: charged in full, at a reduced rate, or not at all?
• Rework: who pays when the client changed their mind, and who pays when you got it wrong?
• Small requests: is a ten minute phone call recorded, or absorbed?
• Handover and briefing time when a new person joins a job.
• Time spent learning something for one client's job.

Sum one: your billable share

Often called utilisation, this is simply the part of paid time that is billable.

There is no single correct percentage. A business owner who also sells, manages and does the books will have a much lower share than a technician who is on client sites all day. What matters is knowing your own number, watching how it moves, and understanding why.

Sum two: what an hour really earns

Your bill rate is what a billable hour earns. But you pay for every hour. Divide the week's income by all paid hours to see what an hour of your team's time really brings in.

This is why the split matters. A bill rate that looks healthy on a quote can be thin once every hour of quoting, travelling and admin has been paid for. When you set prices, start from the cost of a paid hour and your real billable share, not from the rate alone.

Three ways to improve the picture

1. Capture billable time you are already doing

The cheapest gain is time that was worked for a client but never recorded: the call from the van, the extra half hour on site, the evening email. Recording time on the day, by project, catches most of it.

2. Trim non-billable time that isn't earning its place

Look at where non-billable hours go. Some is essential. Some is habit: a weekly meeting that could be shorter, paperwork done twice, travel that better scheduling would remove. Cut the habit, keep the essential.

3. Price for the hours you can't bill

If your work honestly needs 35% of time off the meter, that is a cost of doing the job well. Your rate has to carry it. Underpricing and then pushing people to bill more hours is how quality and morale drop together.

A warning about targets

It is tempting to give every person a billable target. Be careful. People hit the target by padding time, by avoiding training, or by declining to help a colleague because it 'isn't billable'. Use the billable share to understand the business and to price well. If you do set targets, set them for the team, keep them realistic for each role, and never make the timesheet something people are afraid to fill in honestly.

How ClockinBee handles it

In ClockinBee every project has a type: Billable, Non-billable or Internal overhead, so internal work has its own place. Projects can have a client, a bill rate an hour and a budget in hours or money, and a person can have their own bill rate, which is used before the project's rate. People pick a project when they clock in or add hours, or fill in the weekly timesheet grid with a row for each project.

Timesheets go through approval, with anything unusual set aside along with its reason. The Profit by project report shows hours, labour cost, billable value and margin for each project. ClockinBee prepares hours and exports for payroll; it does not send invoices, so use the report figures in whatever you invoice with.

Common questions