You worked 40 hours this week. But how many of those hours can you actually bill to clients?
For freelancers and consultants, this distinction is the difference between thriving and just scraping by. Billable hours generate revenue. Non-billable hours—admin, marketing, invoicing—don't, but they still take time.
Understanding billable hours helps you price correctly, identify where your time goes, and ultimately earn more from the hours you work.
What Are Billable Hours?
Billable hours are working hours you can charge directly to a client. They're time spent on tasks that the client has agreed to pay for—work that delivers value they're receiving.
Simple examples:
- A lawyer researching case law for a client's matter
- A designer creating mockups for a website project
- A consultant conducting analysis for a strategy engagement
- A developer writing code for an application
The common thread: this work is for a specific client, it's part of what they're paying for, and it directly contributes to the deliverable or service.
Billable vs Non-Billable Hours
Typically Billable
- Client meetings and calls
- Project-specific work (design, writing, development, analysis)
- Research directly related to a client project
- Revisions and iterations requested by the client
- Travel time to client site (sometimes—depends on contract)
- Project management for that client's work
Typically Non-Billable
- Invoicing and accounting
- Marketing and business development
- Pitching new clients
- Writing proposals (usually)
- Professional development and training
- Internal admin and scheduling
- General email management
- Networking
Gray Areas (Contract-Dependent)
- Initial consultations — Some charge, some use as sales opportunity
- Travel time — Often billable at reduced rate or baked into project cost
- Proposals and scoping — Some bill for detailed proposals
- Communication time — Extensive email chains might warrant billing
- Revisions beyond scope — Should be billable, but requires contract clarity
The key: define what's billable in your contract before starting work. This prevents disputes later.
How to Calculate Billable Hours
Basic Formula
Billable Hours = Total Hours Worked - Non-Billable Hours
Example:
- You worked 45 hours this week
- 5 hours on invoicing, marketing, admin
- Billable hours: 45 - 5 = 40
Utilization Rate
Utilization Rate = (Billable Hours ÷ Total Available Hours) × 100
Example:
- Available hours: 40 per week
- Billable hours: 28
- Utilization: 28 ÷ 40 = 70%
What's a good utilization rate? It varies by industry:
- Law firms: 85-90% (high targets, associates push hard)
- Consulting: 70-80%
- Creative agencies: 60-70%
- Freelancers: 50-65% (more solo admin burden)
Freelancers typically have lower utilization because they wear all hats—no support staff handles admin.
Billable Revenue
Billable Revenue = Billable Hours × Hourly Rate
Example:
- Billable hours this month: 120
- Hourly rate: $100
- Gross revenue: $12,000
Effective Hourly Rate
This is the metric that really matters:
Effective Rate = Total Revenue ÷ Total Hours Worked
Example:
- Revenue: $12,000
- Total hours worked (including non-billable): 160
- Effective rate: $75/hour
Notice the difference: your billable rate is $100, but your effective rate is $75. Non-billable time costs you $25 per hour in this example.
Industry-Specific Considerations
Legal
- Billing in 6-minute increments (0.1 hour) is standard
- Annual billable targets often 1,800-2,200 hours
- Strict ethical requirements around billing practices
- Detailed time descriptions expected
Consulting
- Mix of hourly and project-based billing
- Value-based pricing becoming more common
- Travel often billed at 50% rate or included in project fee
- Retainer arrangements smooth billable fluctuations
Freelance/Creative
- Project rates often preferred over hourly
- Scope creep is the biggest threat to profitability
- Time tracking still essential even for fixed-price work
- Revision limits should be explicit in contracts
Development/IT
- Estimates often based on past time data
- Scope changes require documented change orders
- Maintenance contracts provide recurring billable work
- Bug fixes: billable or not? Define in contract.
How to Increase Billable Hours
Automate Non-Billable Tasks
- Use invoicing software instead of creating invoices manually
- Template emails for common communications
- Automate scheduling with booking tools
- Batch admin tasks into dedicated time blocks
Improve Time Tracking Discipline
- Track in real-time, not retrospectively
- Use a timer, not estimates
- Review weekly for missed billable time
- Track everything—emails and calls are work
Reduce Non-Billable Work
- Outsource bookkeeping if it makes financial sense
- Use virtual assistants for admin tasks
- Batch similar tasks to reduce context switching
- Delegate or eliminate where possible
Clarify Scope Upfront
- Define billable activities in contracts
- Set revision limits (2 rounds included, then billable)
- Bill for scope changes explicitly
- Track out-of-scope requests and address them
Reduce Meeting Overhead
- Set agendas and time limits for calls
- Bill for client meetings (if appropriate)
- Replace meetings with async communication when possible
- Batch meetings into specific days
The Connection to Profitability
Billable hours directly impact your bottom line. Here's how the math works:
Scenario A: Poor Utilization
- Work 50 hours/week
- Bill 25 hours (50% utilization)
- Rate: $100/hour
- Weekly revenue: $2,500
- Effective hourly rate: $50
Scenario B: Good Utilization
- Work 45 hours/week
- Bill 32 hours (71% utilization)
- Rate: $100/hour
- Weekly revenue: $3,200
- Effective hourly rate: $71
Scenario B works fewer hours but earns $700 more per week because of better utilization. Over a year, that's $36,400 difference.
Tracking Billable Hours
You can't improve what you don't measure. Effective tracking means:
- Categorizing time — Billable vs non-billable, by client, by project
- Reviewing regularly — Weekly utilization reviews catch problems early
- Connecting to invoicing — Tracked time should flow directly to invoices
- Analyzing patterns — Which clients or projects have the best billable ratios?
IronBase includes built-in time tracking that connects directly to invoicing. Track time by client, see what's billable at a glance, and turn tracked hours into invoices with a click. One-time $79 purchase, no subscription, works offline.
When Hourly Billing Doesn't Work
Billable hours assume hourly billing. But sometimes other models work better:
Value-Based Pricing
Charge based on value delivered, not time spent. A logo that transforms a brand is worth more than the hours it took.
Project-Based Pricing
Flat fee for the entire deliverable. Rewards efficiency—finish faster, earn more per hour.
Retainer Arrangements
Monthly fee for ongoing availability. Smooths income fluctuations and ensures recurring revenue.
Even with these models, track your time. You need the data to know if projects are profitable and to price future work correctly.
Key Takeaways
- Billable hours are time you can charge clients; non-billable hours are necessary but unpaid
- Utilization rate (billable ÷ total hours) measures efficiency—freelancers typically hit 50-65%
- Your effective hourly rate is lower than your billable rate due to non-billable time
- Automate admin tasks to increase billable capacity
- Define what's billable in contracts before starting work
- Track time even on fixed-price projects to measure real profitability
- Small improvements in utilization create significant income gains over time
Understanding billable hours isn't just accounting—it's how you run a sustainable freelance business. Know where your time goes, bill for the work you do, and make sure your effective rate matches what you're worth.