A practical guide for service businesses, agencies, contractors and professional firms: what counts as billable time, how to record it accurately, billing increments, common leaks, how billable tracking relates to payroll for hourly employees and how to choose a tracking method.
Billable hours are the hours of work you charge to a client. They are the foundation of revenue for law firms, accounting firms, agencies, consultants, IT services and many trades that bill time and materials. Non-billable hours are work that supports the business but is not charged to a client, such as internal meetings, training, admin, sales and travel that the contract does not cover. Both matter: billable time drives revenue, and non-billable time is a cost to manage.
To total hours with breaks and overtime, use our time card calculator.
| Activity | Usually billable? |
|---|---|
| Work performed on the client’s project | Yes |
| Client meetings and calls about the project | Usually yes |
| Travel to the client site | Depends on contract; often billable or billed at a different rate |
| Fixing your own mistakes | Usually no |
| Internal team meetings | No, unless project-specific and agreed |
| Proposals and sales calls | No |
| Training and learning a new tool | No, unless the client requested it |
| Admin, invoicing and scheduling | No |
Write your rules down and include billable categories in client agreements to avoid disputes.
| Method | Pros | Cons |
|---|---|---|
| Paper timesheets | Simple, no technology | Error-prone, reconstructed from memory, slow to invoice |
| Spreadsheets | Flexible, cheap | Manual, easy to forget, hard to consolidate |
| Timer apps | Accurate, real-time | People forget to start or stop timers |
| Time clock with job tagging | Ties hours to jobs and payroll in one record | Less detail on tasks within a job |
| Practice or project management software | Integrated with billing | Can be complex and expensive |
The best method is the one your team will use consistently. For field and shift-based teams, a mobile time clock with job or client tagging is often the most reliable; for office professionals, timers or detailed timesheets are common.
A five-person IT support company bills clients hourly for on-site visits and remote work. Before tracking properly, technicians filled in weekly timesheets on Friday afternoon from memory. Short remote sessions were often forgotten, descriptions were vague and clients regularly questioned invoices. After switching to recording time per job as they worked, with a one-line description and a client tag on every entry, the firm found that a meaningful share of previously unbilled small tasks became billable, invoice disputes dropped because each line described the work, and the owner could see which clients consumed far more support time than their contract assumed.
The same records also fixed a payroll problem: travel between client sites had not been recorded consistently, so hourly technicians had sometimes been underpaid. One accurate record now feeds both invoices and payroll.
Many professional firms bill in six-minute increments (one-tenth of an hour); others use fifteen-minute increments, or round to the nearest quarter hour. Smaller increments are more precise and usually viewed as fairer by clients. Whatever you choose, state it in the engagement agreement and apply it consistently. Note that rounding for client billing is separate from rounding employee time for payroll, which is subject to wage and hour rules; see time clock rounding.
If your billable workers are non-exempt employees, every hour they work must be paid, whether or not a client is billed for it. Time spent on non-billable tasks, travel between client sites during the day, waiting for a client and fixing mistakes are all generally paid work time. Overtime is due when hours exceed 40 in a workweek, and in some states daily, regardless of billing. Keep one accurate time record that serves both purposes: total hours for payroll and job tags for billing. Do not let billing pressure encourage employees to under-report time; off-the-clock work creates legal risk. See off-the-clock work and how to calculate overtime pay.
| Metric | Formula | What it shows |
|---|---|---|
| Utilization rate | Billable hours / total hours worked | How much of the team’s time is billable |
| Realization rate | Hours actually billed / billable hours recorded | How much recorded time becomes invoices after write-offs |
| Collection rate | Amount collected / amount billed | How much billed work is actually paid |
| Effective hourly rate | Revenue collected / total hours worked | True earnings per hour of work |
Example: a technician works 40 hours, records 30 billable hours, the firm bills 27 after write-offs and collects payment for all 27 at $90 per hour. Utilization is 75 percent, realization is 90 percent and the effective rate across all hours worked is $2,430 / 40 = $60.75 per hour. Target utilization varies by role; managers and salespeople naturally have lower billable shares.
Many firms are moving some work from hourly billing to fixed fees or retainers. Time tracking still matters in those models: it shows whether a fixed-fee project was profitable, whether a retainer covers the actual work and how to price the next engagement. Keep tracking hours by client and job even when you do not invoice by the hour, and review profitability per client every quarter.
Billable hours checklist complete.
EZTime records hours with job and client tagging, so the same time record supports both billing and payroll. Employees clock in by mobile app with a GPS stamp, at an NFC tag on site, on a kiosk or on the web, and select the job or client they are working on. Timecard corrections go through manager approval with an audit trail, and reports export to Excel or PDF for invoicing and payroll. Expenses with receipt photos can be tagged to clients through expense management.
For employees, billable time and paid time are not the same thing. The DOL says no particular form of timekeeping is required under the FLSA, as long as the records are complete and accurate (DOL Fact Sheet 21). But ‘complete’ means all hours worked, not only the billable ones.
A non-exempt technician who spends 30 minutes on non-billable paperwork after a job must still be paid for it. Keep two views of the same timesheet: total hours worked for payroll, and the subset tagged to clients for invoicing. Mixing them up leads either to underbilling clients or underpaying staff.
Time spent on work that you charge to a client under your agreement, such as project work and client meetings. Internal admin, sales and training are usually non-billable.
Record time as you work, tag every entry by client and job, describe the work clearly, use a consistent billing increment and review entries before invoicing.
It depends on the role and industry. Delivery staff often aim for a high share of billable time, while managers and salespeople have lower targets. Set targets per role.
Yes, for non-exempt employees all hours worked must be paid, whether or not the time is billed to a client.
Either can work if stated in your agreement and applied consistently. Six-minute increments are more precise and common in professional services.
It means dividing each hour into tenths, so time is recorded in 0.1-hour units. A 14-minute call becomes 0.2 or 0.3 hours depending on your rounding rule. Law firms and many consultants use it; agree the rule with clients in advance.
It depends on the role and industry. Client-facing staff need time for admin, sales and training, so 100% is neither realistic nor healthy. Track your own rate for a few months and set targets from that baseline.
EZTime tags clocked hours to jobs and clients and exports them to Excel or PDF for invoicing.