How to calculate billable hours
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A number of industries bill by the hour. The most common is the legal industry which is notorious for its excessive use of the billable hour. However, billable hours are also widely used throughout the service sector to bill clients for services performed.
Billable time must have been spent working on a specific client matter. Time spent working on general administrative tasks, such as payroll or business marketing, is not considered billable time.
Create a blank time log to contain time entries and descriptions for time spent on specific client matters. Your time log could be as simple as a sheet of paper with categories for client name, client matter, date, and time spent. Ideally, you should have either paper or electronic files (or both) for each client that retains your services. Keep a copy of your time log in the client's physical or electronic file.
- A number of industries bill by the hour.
- Your time log could be as simple as a sheet of paper with categories for client name, client matter, date, and time spent.
Before you begin working on a client matter, take note of the exact time that you started and write it down on your time log. Any type of clock, watch or timekeeping device will work, as long as it is accurate and in good working condition. Similarly, when you cease working on a client matter, write down the time that you stopped working in your client's time log.
Determine how often you will perform an accounting of billable hours. Some businesses perform a weekly accounting, while others account on a monthly basis. The accounting period usually corresponds with the frequency with which invoices are sent out to clients.
When it is time to calculate your billable time output for a routine accounting, refer to each client's time log. Billable time is usually rounded off to the closest 1/10 of an hour or six minute increment. Round each time entry accordingly. For example, if you spent four minutes on a phone call with Client X, you would actually bill for six minutes.
- Before you begin working on a client matter, take note of the exact time that you started and write it down on your time log.
- When it is time to calculate your billable time output for a routine accounting, refer to each client's time log.
Total up your rounded estimates for each client. Keep a separate record of all totals in either a paper billing file or an accounting software program. This will simplify the billing process when it comes time to send out client invoices.
Multiply the total number of billable hours for each client by your billable rate. For example, if your billable rate is £65 per hour and you accumulated 10 billable hours for Client X this week, you will send an invoice to Client X for £650.
Krystal Wascher has been writing online content since 2008. She received her Bachelor of Arts in political science and philosophy from Thiel College and a Juris Doctor from Duquesne University School of Law. She was admitted to the Pennsylvania Bar in 2009.