Billable Vs. Non Billable Hours | Differences, Examples, & Types [2024] (2024)

Are you aware that understanding the difference between billable and non-billable hours saves time and ensures accurate billing for your business?

Billable and non-billable hours play a central role in optimizing time management and ensuring error-free billing within businesses. It enables companies to assess revenue generation precisely by identifying the time spent on client-based tasks versus non-client activities.

Furthermore, it makes sure that companies are fairly paid for their work and stops them from losing money.

The main aim for businesses with billable and non-billable hours is to make the most of billable hours while managing non-billable tasks efficiently.

By focusing on billable hours, companies can increase their revenue by monetizing the time spent directly on client projects—for example, project work, client meetings, or service delivery.

At the same time, businesses should also recognize the importance of tracking non-billable hours. It encompasses internal tasks like administrative work, training, or business development activities. However, companies cannot bill them to clients.

Hence, balancing these two types of hours is important for organizations of all types.

Experts highly recommend automating time tracking processes to separate billable and non-billable hours efficiently.

By effectively managing and tracking these hours, businesses can;

• Enhance their overall efficiency,
• Increase revenue generation,
• And make informed decisions about resource assignment and project management.

Billable Vs. Non-Billable Hours – The Main Difference

When it comes to managing time and resources within a business, understanding the distinction between billable and non-billable hours is a must.

Here’s a clear breakdown of the main differences between these two 👇

What is a Billable Expense?

A billable expense is any cost incurred by a business. It can be directly attributed to a specific client project or job and is eligible for reimbursem*nt from the client.

Some examples of billable expenses include,

• Travel expenses
• Project materials
• Subcontractor fees
• And any other expenses necessary for completing the project.

Let’s further explain this by an example.

If a marketing agency purchases ad space for a client’s digital advertising campaign. The cost of the ad space becomes a billable expense. Similarly, if a software development firm buys software licenses for a client’s project. The cost of those licenses would also be billable expenses.

These reimbursable costs contribute to the overall expenditure of delivering a service or product to a client.

Therefore, determining what qualifies as a billable expense is an integral part of any business.

Generally, the expense must be directly related to the client’s project or job. Moreover, it must be reasonable and necessary for completing the project.

On the other hand, personal or non-business-related expenses are not considered billable.

Experts believe that documenting billable expenses is necessary for several reasons,

• It ensures accurate billing and reimbursem*nt from clients.
• It provides transparency to clients
• It allows businesses to track project costs effectively.

What Is Billable Expense Income?

Billable expense income refers to revenue generated from expenses incurred on behalf of clients or customers. Billable expenses are billed back to clients as part of the overall service or product cost.

How Many Working Hours Should Be Billable?

You may argue about how many billable working hours a business should charge a client. The answer is not straightforward. It depends on many factors, such as utilization rate and billable rate overrun.

As we know, billable working hours refer to the time spent by employees who are directly engaged in tasks that can be billed to clients. For instance, if a consultant spends four hours drafting a client report, those four hours are billable working hours.

Thus, tracking productivity and utilization rate with billable working hours involves monitoring the time spent on billable tasks versus non-billable activities. This allows businesses to assess how effectively employees are using their time and resources.

For example, if an employee spends 20 hours on billable tasks out of a total of 40 working hours in a week, their utilization rate would be 50%.

Billable rate overrun occurs when employees work more hours on a project than originally planned, leading to a decrease in the billable rate. For instance, if a project was estimated to take 100 hours at a rate of $100 per hour but ended up requiring 125 hours, the billable rate overrun would be 25%.

Therefore, automating hourly time tracking can increase the utilization rate by accurately capturing the time spent on billable tasks. As discussed above, one such tool is Avaza. It eliminates manual tracking errors and ensures that all billable hours are accounted for.

Examples Of Billable and Non-Billable Work

Examples of billable work span across various industries, with each sector utilizing billable hours to maximize revenue and profitability.

Industries such as below heavily rely on billable work to generate income,

• Law firms – for legal consultations
• Accounting businesses – for financial audits
• Digital marketing agencies – for marketing campaigns
• IT firms – for software development
• And consulting companies – for strategic consulting

Law firms bill clients for services like legal research, document drafting, court appearances, and negotiations.

Similarly, accounting businesses invoice clients for audit services, tax preparation, and financial advisory.

Digital marketing agencies charge for services like social media management, content creation, and advertising campaigns.

Moreover, IT firms bill clients for software development, system maintenance, and technical support.

Consulting companies invoice for strategic planning, market analysis, and project management.

On the other hand, non-billable work is prevalent in industries where internal operations and employee growth are paramount.

The following industries rely on tracking non-billable work hours,

• Human resources – for internal meetings
• Administration – for administrative duties
• Education – for planning and grading
• Healthcare – for research and development.

Human resources departments dedicate time to recruiting, training, and employee relations, which are essential for maintaining a skilled workforce.

Similarly, administrative staff handle tasks like scheduling, record-keeping, and office management to ensure smooth operations.

Moreover, in the education sector, teachers spend non-billable hours planning lessons, grading assignments, and attending professional development workshops.

Healthcare professionals engage in non-billable activities such as patient consultations, medical research, and continuing education to deliver quality care.

1. Examples of Billable Tasks

2. Examples of Non-billable Tasks

3. Examples of Tasks That Could Be Both Billable and Non-Billable

Are Billable Expenses Tax Deductible?

It’s no surprise that billable expenses are generally tax-deductible for businesses. For example, travel expenses, materials, client communication, advertising, and preparation and research costs.

However, it’s important to accurately track and document billable expenses to claim them as deductions. Failure to do so may result in potential tax liabilities or missed opportunities for tax savings.

Therefore, businesses should maintain detailed records of billable expenses. They may include receipts and invoices to support their tax deductions and comply with tax regulations.

For example, if a business incurs travel expenses while working on a client project, such as airfare, lodging, and transportation. These expenses can typically be deducted as business-related travel expenses.

Why Should You Automate Tracking Billable And Non-Billable Hours?

By implementing timesheet systems, businesses can streamline their operations and alleviate the burden of manual tracking of work hours. It allows employees to focus on revenue-generating tasks.

Moreover, these systems offer real-time insights into employee activities. Hence, this enables managers to monitor billable hours, identify inefficiencies, and make data-driven decisions to improve productivity.

Furthermore, automation eliminates the risk of human error associated with manual time tracking and prevents revenue leakage.

With an automated system in place, businesses can seamlessly differentiate between billable and non-billable hours. Consequently, this will reduce disputes with clients and enhance transparency in billing practices.

Additionally, automation facilitates seamless integration with billing and accounting software, streamlining the invoicing process and expediting payment collection.

However, if you are looking for an all-in-one project and work management software solution that offers features like time tracking, , expense management, and more in one place, Avaza is the answer. You can use it for free here and assess whether it can be a good fit for your business or not!

Best Time Tracking Software Options That Can Track Both Billable & Non-Billable Hours | Top 4 Picks

You can easily find many time tracking software options in the market. However, we have chosen the top 4 that are best suited to track both billable and non-billable hours.

Let’s discuss some of them one by one here.

1. Avaza | All-In-One Project & Work Management Software

Avaza – your all-in-one solution for tracking both billable and non-billable hours.

With Avaza, businesses of all sizes across various industries can efficiently manage their time and resources with accurate billing and project management.

Avaza’s user-friendly interface makes it easy for teams to track the time they spend on billable tasks. Moreover, it ensures that every minute is accounted for and invoiced appropriately.

Whether you’re a small startup or a large corporation, Avaza adapts to your needs. It is scalable and allows you to customize billing rates and project budgets to suit your business.

But Avaza isn’t just for billable hours. It also excels in tracking non-billable hours, such as internal meetings, administrative tasks, or professional development.

So why choose Avaza over manual tracking or other software solutions? The answer lies in its seamless integration of project management, time tracking, and invoicing features.

Unlike spreadsheets or disjointed systems, Avaza centralizes all your project-related activities in one platform. It eliminates the need for multiple tools and reduces the risk of errors.

Moreover, Avaza’s powerful business reporting capabilities provide valuable insights into your team’s performance, project profitability, and resource utilization.

1. Project Management

Avaza has the most powerful project task management features. It makes task creation and management simple and easier for everyone. Users can create tasks, set priorities and deadlines, and assign them to team members or clients.

The flexible interface accommodates various task views, including list views, Kanban boards, and Gantt charts. Therefore, teams can organize their work in a way that suits them best.

One of Avaza’s key strengths lies in its ability to facilitate productive team collaboration. Through online and email-enabled discussions, team members can provide instant feedback on tasks. Consequently, keeping all relevant information in one centralized location.

Additionally, Avaza’s smart email integration allows users to convert emails into tasks seamlessly, eliminating the need for manual data entry.

Avaza also excels in team management, offering role-based security and task-level permissions to ensure that users have the appropriate access levels.

2. Project Resource Scheduling

Avaza’s project scheduling features interactive resource planning. It allows teams to view their schedules on a single page, create new assignments, and effortlessly make smarter project scheduling decisions.

Avaza enables businesses to allocate the right people to projects at the right time, improving team utilization and project efficiency. Through availability bars, users can easily identify underutilized and overutilized team members, helping to maximize resource allocation.

Furthermore, Avaza offers complete control over team availability. It lets users configure daily availability, skills, billable rates, and cost rates for each team member. Avaza ensures smooth project execution by managing team leave within the scheduling system.

Moreover, Avaza also enhances team communication and productivity by clearly communicating project priorities to team members and streamlining timesheet entry. Team members can view their weekly scheduled assignments on any device and convert scheduled assignments into timesheet entries seamlessly.

3. Online Timesheet

Avaza’s online timesheets let you start and stop timers across any sort of device. You can track time directly from tasks or enter entries in daily or weekly views. Moreover, you can set project, category, or person rates per hour for each project.

Furthermore, Avaza enables you to customize rates per project or category for precise invoicing and profitability insights.

Avaza lets you enable timesheet approvals and review submissions for smooth workflow management. It gives you access to add billable hours to invoices and group timesheets for clarity.

In addition, Avaza’s native mobile app allows time tracking on the go with single-tap timers and detailed entry options.

4. Online Invoicing

With Avaza online invoicing, businesses can send personalized invoices customized to each client, country, and legal requirement. The platform enables users to customize invoices with logos, colors, and fields, ensuring a professional and branded appearance.

One of Avaza’s standout features is its ability to handle recurring invoices, automating the process of collecting regular payments.

Users can set up preferred schedules and dynamically customize each invoice. Additionally, Avaza allows for the inclusion of unbilled time and expenses in invoices, providing clients with a transparent overview of project costs.

Furthermore, Avaza facilitates online payments through popular gateways like PayPal, Stripe, and Payoneer, offering customers convenient options to settle invoices. The software also includes an auto-reminder feature, ensuring that outstanding invoices are managed efficiently with proactive reminders to clients.

5. Recurring Invoicing

Avaza’s recurring invoicing feature offers to manage ongoing billing cycles. With this feature, businesses can effortlessly establish recurring billing schedules, ensuring timely and accurate invoicing without manual intervention.

Setting up is quick and simple – users can define their preferred billing frequency and method, whether it’s via email with PDF attachments or saved drafts for review before sending.

Avaza’s recurring invoicing offers flexibility. Unlike static fixed-amount invoices, Avaza allows users to include unbilled timesheets and expenses from multiple client projects.

Another smart feature is the use of dynamic variables, which automatically populate invoice fields with relevant data, such as billing period dates and month names. This contextual information adds clarity and professionalism to each invoice.

Moreover, Avaza provides granular control over invoice generation. Hence, allowing users to select specific client contacts for notification and determine the time of day invoices should be generated.

6. Reporting

With Avaza’s reporting feature, you can easily see how your business is doing with clear visual reports. Whether you’re checking if your projects are making money or making sure your team is working efficiently, Avaza’s reporting tools can help.

The project dashboard report shows you which projects are spending too much money, need to be billed, or might be in trouble. You can also make your team work better by keeping an eye on important things like task progress, estimated time, and how much is done.

When it comes to money related stuff, Avaza’s business reporting makes it simple. It quickly shows you any time, expenses, or set costs that haven’t been billed yet.

You can customize reports in real-time to see just what you need. And you can set them up to be sent automatically, saving you time.

Plus, you can export the data into useful formats like Excel or CSV, whether you want a quick overview or lots of details.

7. Quotes and Estimation

With Avaza’s quotes and estimates, you can make professional quotes quickly. It has ready-made templates you can use from any device. Clients can see and respond to estimates online, making it easy for them to give feedback and approvals.

Avaza’s software also helps you check and follow up on estimates easily and on time. It finds pending approvals fast and sends reminders. Avaza works with different currencies and languages, so you can customize estimates for international clients as well.

Once accepted, quotes can turn into invoices and project tasks with just one click, saving time on entering data. Clients can use the Avaza Client Portal to accept or reject quotes, see estimates and invoice history, and pay online.

8. Integration

You can connect and share data with your favorite apps with Avaza’s integrations.

Integrate Avaza with Zapier for versatile connectivity across a wide range of applications.

Need accounting integration?

Avaza seamlessly syncs with Xero & QuickBooks, ensuring that your financial data stays up-to-date across platforms.

For CRM needs, Avaza offers integrations with SharpSpring & Insightly, keeping your customer interactions organized and efficient.

Avaza also simplifies project management with integrations like Trello & Basecamp, allowing you to keep track of tasks and deadlines effortlessly.

In order to streamline communication, Avaza integrates with Zendesk, GitHub, & Slack, ensuring that your team stays connected and productive.

Avaza Online User Reviews

As of the writing date, Avaza has 4.7 out of 5 stars on Capterra.

Here’s what some of Avaza’s users have to say about their product.

Try Avaza For Free

If you feel that Avaza might be the right time tracking software for your business,sign up to start using Avaza for free.If you need any help with your Avaza subscription or want to better understand our pricing, please contact chat support or email[email protected].

You can evenbook a call/demoto see how Avaza can be beneficial for your business.

2. Jira

Jira is a project management tool designed to plan, track, and manage work across various teams. It helps in breaking down complex projects into manageable tasks, organizing work, setting milestones, and mapping dependencies.

However, one limitation of Jira as a billable hour tracking software is its lack of customization of native features for tracking billable and non-billable hours.

Therefore, it may not provide dedicated functionalities for detailed time tracking required for accurate billing purposes.

Key Feature,

1. Task organization
2. Progress tracking
3. Integration capabilities
4. Milestone setting
5. Dependency mapping
6. Customizable workflows
7. Real-time collaboration
8. Reporting and analytics
9. Agile project management
10. Mobile accessibility

Currently, Jira has 4.5 out of 5 stars on Capterra.

Here’s what one of the users of this tool had to say about its performance.

“Sarat Chandra P. found Jira excellent. According to Sarat, Jira offers the most comprehensive view of projects and ongoing tickets. He appreciates its collaborative tools, which make data integrations simpler and more intuitive. However, he pointed out that the filtering and search system could be improved, especially when creating views or searching for specific keywords.”

3. Asana

Asana is designed to streamline work processes and enhance collaboration across teams. It allows users to organize tasks, set milestones, and track progress in real-time, thereby promoting clarity and accountability.

However, one limitation of Asana is its lack of powerful time-tracking features. Thus, it is not ideal for the accurate monitoring of billable and non-billable hours.

Key Features,

1. Task organization and prioritization
2. Project timeline visualization
3. Team collaboration and communication tools
4. Customizable project templates
5. Integration with third-party tools and apps
6. Goal setting and progress tracking
7. File attachment and sharing capabilities
8. Mobile accessibility
9. Activity feed for real-time updates
10. Task dependencies and subtasks management

As of now, Asana has 4.5 out of 5 stars on Capterra.

Here’s what one of the users of this tool had to say about its performance.

“Carolyne M. found Asana to be an excellent tool. Carolyne noted that Asana’s simplicity was its strength. She found the interface clean and intuitive, allowing for efficient management of multiple projects and categories. Working with teams was seamless, with easy task assignment and monitoring.”

4. Monday.com

Monday.com is a management platform that caters to the needs of various businesses, offering customizable products that scale with requirements. It provides solutions for HR, marketing, projects, tasks, IT, and more, allowing teams to manage their work efficiently.

However, one limitation of Monday.com is its lack of advanced invoicing features, which may limit its ability to generate detailed billing reports for clients.

Nonetheless, it offers numerous features, including;

1. Customizable dashboards
2. Integrations
3. Automation
4. Gantt charts
5. Kanban boards
6. Document management
7. Forms creation
8. Sales CRM
9. Work Management
10. File management

As of the writing date, Monday.com has 4.6 out of 5 stars on Capterra.

Here’s what one of the users of this tool had to say about its performance.

“Nicole M. found Monday.com excellent for project management. Nicole mentioned that Monday.com was easy to set up and intuitive to use. She found it to be a great tool for project management. However, she noted that it could take time to get used to all its features.”

Is It Necessary to Communicate Billable Hours With Clients?

Experts recommend businesses keep clear visibility in their billable hours. Clients appreciate knowing how their money is being spent and what they’re getting in return. Hence, clearly outlining billable hours helps build trust and strengthens the client-business relationship.

Furthermore, it shows professionalism and accountability, demonstrating that you value their investment and are committed to delivering results. Moreover, it prevents any surprises when clients receive their invoices, reducing the likelihood of disputes.

Utilizing technology can streamline the communication process. Project management tracking tools like Avaza make it easy to record and categorize billable hours. Also, it provides accurate reports that can be shared with clients.

Why Is It Important To Track Non-Billable Hours?

You might think that only keeping tabs on the hours you can bill to clients is enough to reach your business goals. But actually, keeping track of the hours that can’t be billed is just as crucial.

It helps you see how your employees are spending their time, allowing you to spot areas where things might not be working efficiently and where there’s room for improvement.

It also helps you determine where you might need to provide extra support or training and where you could better use your resources.

Plus, by tracking these non-billable hours, you can see how well your internal processes are working and find ways to improve them.

So, here are the main reasons why keeping track of your non-billable hours is important.

1. Learn Which Clients Require More Non-Billable Time

To figure out which clients need more free hours, check what kind of projects they have.

Clients with complicated or changing needs usually need extra time for things like researching, planning, and talking with them.

Also, notice how clients interact and what they need for their projects. This can help you find the ones that always need more free help.

Think about how much you need to talk and work together with clients. If they need lots of updates or changes, they might need more free time from you.

2. Identify Potential Billable Hours

Businesses tracking non-billable hours can find areas where employees spend time that could be potentially billed to clients. This insight allows businesses to identify opportunities to convert non-billable activities into billable services.

Leveraging technology, such as time management software like Avaza, helps automate the process, making it easier to identify billable hours.

3. Learn To Make Non-Billable Hours More Efficient

You should identify tasks that consume more time than necessary and look for ways to streamline them. This might involve implementing automation tools and delegating tasks.

By understanding where your time is being spent, you can prioritize high-value activities and minimize time-wasting tasks.

Additionally, regularly reviewing and adjusting your processes ensures continuous improvement because every minute counts.

How to Reduce Non-Billable Hours?

To cut down on unpaid hours, first, invest in a good time tracking system. These software helps keep track of what employees are working on.

Later, make sure employees log their time on projects quickly and well.

Moreover, make company processes smoother to reduce time spent on boring tasks. Instead, use technology to handle things like filling in data, making reports, and sending invoices. This frees up time for work that brings in money.

Furthermore, give clear instructions and deadlines to avoid wasting time on things that aren’t important.

You can also train employees and give them what they need to do their jobs better. Encourage them to talk and work together.

Strategies to Reduce Non-Billable Hours

By implementing the strategies given below, businesses can effectively reduce non-billable hours and increase their overall revenue.

How to Balance Billable and Non-Billable Hours?

While there’s no one-size-fits-all solution, meticulous time tracking is key. By carefully recording how long projects take and comparing that to what was planned, companies can find ways to improve.

Tracking time isn’t just about accurately billing clients; it’s also about covering the costs of other activities. This time management method ensures that every hour counts toward the business’s success.

Avaza offers a great tool for tracking time. It makes it easy to measure both billable and non-billable hours. With its easy-to-use interface and helpful data analysis, Avaza helps businesses make the most of their time and grow.

Pros & Cons Of Tracking Billable Hours

Pros & Cons Of Tracking Non-Billable Hours