Freelancers can get paid in a few different ways. While some may have a set price, others will get paid for the time they work. The time that you charge to a client is known as your billable hours and it's important you know how they work.
If this is how you earn your income then you need to know which tasks count as billable time, how to calculate billable hours, and how to increase your total billable hours. We're going to take a look at that here so you can make the most of your time.
What Is The Definition of Billable Hours?
If you're wondering “what is billable hours,” then you'll be happy to know that the answer is fairly simple. It's the time that you charge to the client either with a time tracking app or with a manual time log, depending on your agreement.
These hours include all the time that you spent working on a certain task. If you're a writer who needs to do 60 minutes of research before starting your work, then that would be a billable hour. As long as it's a part of the assigned project, then it all goes towards your billable hours.
You may agree beforehand on some parameters with your client, which can be useful before you get started. These could include your estimated billable hours and a maximum that the client can pay for. These agreements can prevent any disagreements on the time spent.
What Counts as non-billable?
Time tracking your work means you can only bill for the time that you spend on the task and nothing more. In some salaried jobs, you get paid for all of your hours worked, regardless of what you are going but billable hours are a little different.
If you are halfway through a client's project and need to stop for a bit of lunch then that would be an example of non-billable hours as you'd have to stop your time tracking and resume it again once you're back on the task.
There are other tasks related to your client's project that are also non-billable hours. These include the initial proposal to get the job and sending the invoice after it. The client would not expect you to exclude these when calculating billable hours.
Unrelated tasks when completing the tasks are also non-billable hours. These could include replying to emails from other clients, taking phone calls, or attending meetings that aren't relevant to your current contract.
What Counts as Billable Time?
While there are basic rules on this, it's important to set boundaries with your client before you get started to see what counts as billable and non-billable. It can also depend on the billable hours tracker that you're using.
On a basic level, as long as whatever you're doing is related to the client's project, then it should count as a billable hour. This could be picking up supplies, reading research, or replying to their emails. It's important to not give up your time for free if it's for someone else's project.
The research point there is a good example. A writer may be shy about including something that isn't writing as a part of their billable hours. Good writing requires good research and therefore you should count it towards your total hours.
This is why whenever you're doing a billable task, you lock yourself into that one task and don't get distracted by anything else. This makes it a lot easier to track time for your work tasks and be confident when invoicing for your billable hours.
How to Set Your Billable Hours
It's always a great idea to properly track billable hours. This minimizes the chances of disputes but also gives you the confidence to charge for all of your working hours. It's important that you don't undersell your work and invoice for all of your billable time. Here are some steps you need to follow.
1. Agreeing on an Hourly Rate
This is obviously a crucial detail when it comes to billable hours, you need to know what you are invoicing. You should already have an idea of what you charge and this needs to be fully agreed upon before you start to track your billable hours.
You can't ask for more money in the middle of a task, and nor should the client be surprised when they get your invoice. Make sure you get paid properly for your work and lock in your billing rate before you do anything.
2. Having a Billing Cycle
Invoices not being paid can be a huge issue for freelancers. Trying to chase up your payments can take up a lot of time which is why you should agree on a billing cycle. This could be a monthly billing cycle or perhaps you agree that the client will pay by a certain date.
It's something that can easily be forgotten. There are some websites such as UpWork that lock in the payments for both client and freelancer and will automatically pay you after a set period. Most of the time, it's done on trust.
Along with setting a billing cycle, you should also agree on a payment method before you get started. You don't want there to be any questions once you've finalized your billable hours.
3. Logging Your Time
There are plenty of time tracking apps out there such as Indy’s Time Tracker that will accurately calculate the time you spent on a project. This is a better option than manually tracking it as you'll have the evidence to back up your invoice.
If you're completing multiple tasks at the same time, then you also need to track them separately. Most clients will have an expectation of the amount of time a project will take and if your billable hours fall within this, they most likely won't question it.
If you are tracking billable hours manually, then you may want to provide evidence of this through a spreadsheet and also make a note of any issues that may have occurred, such as research being more difficult than anticipated.
Whether done manually or by a time tracking tool, billable hours need to be logged. It's best to automate it, even if it's through a simple time tracking app.
4. Billing Projects Correctly
The importance of your project management will depend on how you work. It could be that you're a designer working on several projects at once. Alternatively, you may be a writer who only ever has one job at a time.
If you're more like the former, then you'll need a more robust solution for tracking your billable hours. There is time tracking software available that allows you to have multiple projects and track billable hours with evidence.
When it comes to multiple projects, all the advice we've given is even more important. Rather than using project management apps, focus on time tracking apps that allow you to have multiple projects. It's a subtle but important difference and will save you plenty of time.
5. Knowing Your Total Billable Hours
There are many advantages to tracking billable hours and one of those is that you don't need any calculations when you're finished. You'll have the total amount of time worked right in front of you and you can invoice for it.
The client will then know exactly how many billable hours you've worked and can't have any complaints. If you wanted to double-check, then you can go into your software to see that it has been correctly recording billable hours.
Remember, when you track your billable hours, don't be hesitant about including everything you've spent time on. Even if they are administrative tasks associated with the project, then include them in your total billable hours.
6. Creating an Invoice
You don't want to leave your client with any questions about the work that has been done. The exact nature of the invoice will be heavily dependent on the client and how they operate. Online businesses rarely receive invoices in the old-fashioned way.
A lot of companies will have their own payment form that needs to be filled out and sent back. On websites such as UpWork an invoice isn't required at all as it is all included in the software. The payment arrangements should have been pre-agreed with your client.
If you're being paid via PayPal, then they have their own invoicing system that can easily be filled out. It's fairly simple to use and then you can withdraw that payment directly into your bank account.
If you do need to create an invoice from scratch, you can use one of Indy’s free invoice templates. With an invoice such as this, you can create an itemized list detailing all of your work along with your requested payment and contact details.
Maximizing Your Billable Hours
Many freelancers can be hesitant in getting the most out of their billable hours. You can doubt whether or not a task is billable and not include it if you're unsure. Here we take a look at how to get the most out of your hours worked.
1. Track All Your Billable Time
In simple terms, don't make up your time. Keep track of all your billable time accurately. If your client thought the task may take three hours but it actually took five, then you need to charge for the five. Don't think you've done a slow job. Instead, the client has made a mistake by underestimating the task.
If you're not confident, you may track time until the three hours and then not track your billable hours when you get over that limit. This is wrong. It's important to have a basic rule for yourself that you get paid for your working hours and the time spent on a task.
How can you handle this situation professionally? Well, here are a few tips:
- Never work for free. If you want to finish a task and it takes you only an extra ten minutes over your agreed time, then maybe the best thing to do is count those ten minutes as ‘client goodwill time.’ You are investing in that relationship instead of working for free.
- Contact your client. If a task is going to take much longer than the agreed time, talk to your client about it. Perhaps you both underestimated the amount of work required. Don’t offer to work for free, but do tell the client about the changes.
2. Track in Real Time
Track in real time and shut out any other tasks. When you record time correctly, you'll see a huge increase in productivity. Your hourly rate can be increased with future projects if you're consistently exceeding expectations.
It's a good idea to dedicate a block of time to a certain task. For example, you finish your breakfast and you have three hours until lunch. Shut down your email, avoid distractions and start tracking your time with a mobile app or a desktop app.
When you take that approach, you'll see a huge increase in output. Importantly, it also means that all of your work is being paid for. You can't cheat a real time tracker and it gives the working relationship a lot of confidence.
3. Record Your Non-Billable Time
Productivity loss is the enemy of the freelancer. A good exercise is to track your non-billable time. You might stop halfway through a task as you need to go to the restroom. You pause your tracker for this perfectly legitimate reason and get back to your desk.
Instead of immediately clicking your time tracker back on, you decide to have a quick check of Facebook, and then half an hour later, you realize that you've wasted your time being distracted.
By tracking your non-billable hours, you become much more aware of the time you are wasting. This will enable you to stop wasting time and earn much more money. You'll initially be surprised about how much time you waste.
4. Stop Procrastinating and Be Confident
Don't worry about the task at hand, just start tracking your time and get on with it. We mentioned social media there but a lot of the procrastination can become before a project even gets started. Much of this is putting it off as you're not fully confident.
You need to not only be confident about the work that you're providing but also the billable hours you can charge. As a freelancer, you are solely responsible for the money you make and this should be at the forefront of your mind.
FAQ
How do billable hours work?
Billable hours are any time that you spend on a client's project. Whatever task that is, as long as it relates to the outcome the client wants, it's billable. Exactly how you bill for these hours will depend on how you track your hours and the agreement you have with the client.
Is there an app to track billable hours?
There are many, many apps which all offer slightly different features. Some examples are Timecamp, ProofHub, and Hubstaff. Often a client will have an app that they ask you to use and this can make the process easier.
Do you bill for invoicing time?
Generally, no. For most people, they would categorize this as non-billable time. This is one of your personal administrative tasks and the client most likely won't expect to pay for it. If you know what you're doing, invoicing should only take a few minutes.
How do freelancers keep track of hours?
As you may have guessed, in many different ways. Some guess (bad idea) and some do it manually whereas others may use the many different types of software available. It's important to know the answer for your own work before you start a task.
How do you write an invoice for billable hours?
Thankfully as we looked at before, there are free templates available that allow you to easily create an invoice. Plenty of times you don't need to as the invoice will be integrated into the software or the client will have their own system for you to use.
