Short answer: Billable time is work you can charge a client for under your agreement with them: the project work itself, and usually the calls, research and travel that the agreement covers. Non-billable time is everything else: sales, internal meetings, admin, training and redoing work because of your own mistake. Track both: the non-billable part shows what each client costs you.
Disclosure: I co-founded Teamo and Opsters, the agency Teamo was built out of.
What counts as billable time?
Billable time is any work the client agreed to pay for. Your contract or statement of work decides it, not the type of task. Usually billable:
- The delivery work itself: building, designing, writing, configuring
- Meetings and calls with the client about their project
- Research and preparation done for that client's work
- Extra changes the client asks for, if the agreement says extra work is charged
- Travel, if the agreement includes it
What counts as non-billable time?
Non-billable time is work that keeps your business running but that no client pays for directly:
- Sales: discovery calls, proposals, demos for prospects
- Internal meetings, planning and reporting
- Admin: invoicing, hiring, bookkeeping
- Training and learning a new tool
- Work on your own business, such as your website or your internal automations
- Redoing work because of a mistake on your side
Where are the gray areas?
A few kinds of work are billable at some businesses and not at others. Decide them once and write the rule down, so the team doesn't decide case by case:
| Work | Often billable when | Often non-billable when |
|---|---|---|
| Fixing a bug or error | The client changed the requirements | The mistake was yours |
| Onboarding a new client | The agreement includes a setup fee | It's part of winning the deal |
| Quick questions by email or chat | They add up to real work | They take a minute and are part of the service |
| Project management | It's in the quote as a line item | It's included in your rate |
| Learning a client's tool | It's specific to that client | It's a skill you'll reuse elsewhere |
Why track non-billable time at all?
Track it because it shows what each client really costs you. If a client on a 20-hour monthly retainer gets a one-hour unbilled call every week, you work about 24 hours for 20 hours of pay. You only see that if the calls are tracked.
Non-billable time also shows where the team's week goes. If sales and admin take a third of someone's hours, that's a staffing or pricing question you can't answer without the numbers.
How do you calculate utilization?
Utilization is the share of someone's available hours that went to billable work:
Utilization = billable hours ÷ available hours
Someone with 40 available hours in a week who logged 32 billable hours has a utilization of 80%. Divide by available hours, not by hours tracked: dividing by tracked hours makes anyone who doesn't track their non-billable time look fully billable. Look at it per person and per month, not per day: a week of sales calls or training pulls it down, and that's expected. The right target depends on the role. A founder who also sells will be lower than a full-time delivery person.
How do you track billable and non-billable time without guessing on every entry?
Set a billable default per client or project, and let each entry take it. People only change the exceptions.
In Teamo, you set billable as a default on the Clients module, on one client, on a task or on a step under the task. A new time entry takes the most specific setting, and the person can still switch it. A typical setup:
- Set the Clients module to billable.
- Set a client on a fixed fee to non-billable.
- Set an internal task under a billable client, such as fixing your own bug, to non-billable.
Time tracked on your own internal projects goes into a module set to non-billable, so it never lands on a client report. That's how we track internal work at Opsters, our automation agency; see Inside an automation agency. The time tracking Reports tab then shows billable and non-billable hours side by side, per person, per client or per task, and the export includes a billable vs non-billable section. If clients see their hours on a client portal, turn on "Billable only" in the portal's time tracking widget, so they never see your internal time.
For turning billable hours into invoices, see How to track billable hours per client and turn them into invoices.
FAQ
Is time spent on sales billable? No. Discovery calls, proposals and demos happen before there is a client to bill. Track them anyway, as non-billable, to see what winning a client costs.
Is fixing my own mistake billable? Usually not. If the error was on your side, the fix is non-billable. If the client changed what they asked for, the change is usually billable under most agreements.
Should I track non-billable time? Yes. It shows what each client costs and where the team's week goes. Without it, you can't tell whether a client is profitable or calculate utilization.
What is a good utilization rate? It depends on the role. Full-time delivery people are expected to be mostly billable, while founders and managers who also sell and run the business are lower. Compare each person with their own role over a month, not with one number for everyone.
How do I stop people from marking the wrong thing as billable? Set billable defaults per client and per task, so the timer starts with the right choice. You can set the default on many clients or tasks at once from the table's bulk actions, and review timesheets weekly to catch the exceptions.