Billable hours are the time spent on client work that can be charged to that client. Non-billable hours are working time that supports the business or the client relationship but does not appear on the client’s invoice. The difference matters because it shapes utilization, pricing, staffing, and profitability across professional services.
You can work from 8am until 6pm and still record only a handful of billable hours. According to Clio’s 2024 Legal Trends Report, the average lawyer captures 2.9 billable hours in an eight-hour workday, a utilization rate of 37%. The AffinityLive Time Is Money study also found that delayed time entry reduces the accuracy of professional-services timesheets.
Whether you run an accounting practice, law firm, consultancy, agency, or freelance business, tracking both categories shows how your working time supports revenue. This guide explains what counts as billable, what remains non-billable, how to calculate utilization, and how to improve the balance without treating necessary internal work as waste.
What are billable hours?
Billable hours are the time you spend on client projects or matters that you’ll charge for. This is the work your client hired you to deliver.
For a bookkeeper, billable hours might include reconciling accounts, processing payroll, or preparing monthly financial statements. For a lawyer, they might include drafting contracts, appearing in court, or conducting legal research for a specific case. For a consultant, they might include running workshops, analysing data, or preparing strategic recommendations.
You can attribute billable time to a specific client engagement. When you’re billing accurately, these hours become line items on your invoices.
What are non-billable hours?
Non-billable hours are working hours that are not charged to any client. They cover the work that keeps a business running, such as administration, invoicing, internal meetings, training, and business development, none of which appears on a client’s invoice.
Common examples of non-billable time include:
Internal operations and administration:
- Staff meetings and team catch-ups
- Business development and networking
- Internal accounting and bookkeeping for your own firm
- Hiring, onboarding, and HR activities
- IT troubleshooting and system maintenance
Professional development:
- Training sessions and continuing education
- Industry conferences and seminars
- Studying for certifications or credentials
- Mentoring junior staff
Client relationship activities (often non-billable):
- Initial consultations and scoping calls
- Proposal and pitch preparation
- Progress update meetings (depending on your billing practices)
- Relationship-building conversations
Administrative tasks:
- Invoicing and collections
- Filing and documentation
- Email management
- Travel time (policies vary by firm)
Each firm sets its own policy for billable work. Some law firms bill for travel time; others don’t. Some consultancies bill for client calls; others treat them as relationship management. Define your boundaries and explain them to clients instead of relying on a universal rule.
Billable vs non-billable examples by profession
The same activity may be billable in one engagement and non-billable in another, so the client agreement and firm policy always decide the final classification. These are common starting points:
| Profession | Common billable work | Common non-billable work |
|---|---|---|
| Lawyers and law firms | Legal research, drafting, client advice, court preparation | Firm administration, training, general business development |
| Accountants and bookkeepers | Reconciliations, payroll, tax work, client reporting | Practice administration, internal finance, software training |
| Consultants | Workshops, analysis, recommendations, implementation | Proposals, internal methodology, general networking |
| Agencies | Client strategy, design, development, campaign delivery | Internal meetings, marketing the agency, staff development |
Understanding billable utilization rate
Billable utilization rate is the percentage of available working hours that are billed to clients. It turns the raw split between billable and non-billable time into a comparable measure of capacity, efficiency, and profitability.
What does billability mean?
Billability is the extent to which a person’s working time can be charged to clients. Firms usually measure it through billable utilization: the share of available hours recorded as billable. A role with a 75% billability target is generally expected to spend about three-quarters of its available working time on chargeable client work, although the precise definition of “available” varies by firm.
How to calculate your billable utilization rate
Billable Utilization Rate = (Billable Hours ÷ Total Available Hours) × 100
If you work 40 hours in a week and bill 28 of those hours to clients, your utilization rate is:
(28 ÷ 40) × 100 = 70% utilization
What’s a good utilization rate?
The rate varies by industry and role. According to Statista’s analysis of professional services data (sourced from Kimble and Sage), the global average billable utilization across professional services organizations was 68.9% in 2023, down from 73.2% in 2021. The SPI Professional Services Maturity Benchmark identifies 75% as the optimal threshold for sustainable profitability.
Industry benchmarks provide more context:
- Accounting and bookkeeping firms: The AICPA’s 2023 MAP Survey reported a median utilization of 59.6% across accounting practices, with a target range typically around 65-75%.
- Law firms: Clio’s data shows an average utilization rate of 37% for law firms. This measures billable hours against an eight-hour day, including the non-billable work that lawyers must perform. Traditional law firm targets often require associates to record 1,800-2,000 billable hours each year.
- Consulting and agencies: Generally expect 70-80% utilization, with industry benchmarks suggesting that pushing beyond 80% consistently leads to burnout and turnover.
- Freelancers and solos: Often achieve 50-70% because one person handles business development, administration, and client work.
A 100% utilization target leaves no room for the administration, training, and business development that keep a firm running. A useful target protects that work while leaving enough capacity for profitable client delivery.
Realization rate
Utilization and realization measure different parts of the path from working time to revenue.
Realization rate measures how much of your billable time reaches an invoice and, ideally, gets paid. It accounts for discounts, write-offs, and hours that never make it onto a bill.
How to calculate realization rate
Realization Rate = (Revenue Billed ÷ Value of Billable Hours Worked) × 100
For example, if you tracked 100 billable hours at $150/hour ($15,000 value) but only invoiced $12,000 due to write-offs and discounts, your realization rate would be 80%.
According to Clio’s 2024 benchmarks, the average realization rate for law firms is 88%. Firms therefore lose 12% of their potential revenue before sending the invoice. Solo and small firms average around 86% realization and 90% collection rates. Over a year, the 14% of unbilled value and 10% of uncollected invoices can become a substantial cost. Time tracking for lawyers makes that time and its billable value easier to review before write-downs become permanent.
Together, the two rates show how much available time you bill and how much of that billed value reaches an invoice.
Billable hours by industry
Your approach to billable and non-billable hours should reflect the norms and expectations of your industry.
Accountants and bookkeepers
Accounting and bookkeeping firms often work with a mix of recurring engagements (monthly bookkeeping, payroll) and project-based work (tax preparation, audits). This creates some unique considerations.
Monthly retainer clients may have hours “included” in their fee, making utilization tracking more nuanced. Tax season creates dramatic fluctuations in billable hours. Continuing professional education (CPE) requirements mean regular non-billable training time. Software setup and data migration for new clients is sometimes billable, sometimes not.
Tracking all time, including time spent on fixed-fee engagements, helps accounting professionals understand project profitability and price future work with better evidence.
Lawyers and law firms
Legal professionals often face the most rigorous billable hour requirements. According to NALP’s research, billable hour requirements at law firms typically range from 1,700 to 2,300 hours annually, with most offices requiring either 1,800 or 1,900 hours. The Yale Law School Career Development Office notes that larger firms often push toward 2,000-2,200 hours for associates seeking top compensation.
Key considerations for legal billing:
- Ethics rules require accurate time records and reasonable billing
- Many jurisdictions have specific requirements for how time must be documented
- Pro bono work is tracked separately but still represents important time allocation
- Travel time billing varies significantly by firm and client agreement
Reliable time tracking for lawyers helps them manage the pressure of billable targets without reconstructing their work later.
Consultants and agencies
Consulting work often involves significant non-billable time for proposal development, thought leadership, and client relationship building. Common approaches include:
- Proposal and pitch time is typically non-billable but tracked for business development analysis
- Internal research and methodology development may be non-billable but creates future value
- Some firms have “investment time” budgets for building expertise in new areas
- Client entertainment and relationship management hours are tracked but not billed
Consultants using time tracking software can see whether client delivery leaves enough capacity for business development. A team at 100% utilization has no time to win its next project.
Why track non-billable hours?
Tracking only the hours you bill hides part of the cost of serving each client. A complete time record supports pricing, capacity planning, and process improvement.
Identify profitable clients
Some clients require more guidance, revisions, or communication than others. If Client A and Client B pay the same rate, they may appear to be equally profitable. If Client A also requires hours of non-billable meetings and scope discussions, the two clients produce different margins.
That record gives you better evidence for pricing and client selection.
Find unrecorded billable hours
When you track everything, you may find work that should have been billable. A quick client call can turn into a 45-minute strategy session. An email chain can contain detailed advice. You may bill for that work or account for it when you set your rates.
Research suggests that firms with proper time tracking practices can increase billable hour capture by 20-30% within 90 days of implementation. The firms had already done the work but had not recorded it on their invoices.
Find inefficient processes
Tracking non-billable time helps you see where your firm spends its hours. If your team spends 15 hours a week in internal meetings, the time record gives you a basis for deciding which meetings to shorten, combine, or replace with written updates.
According to industry analysis, firms that track non-billable time often identify 15-25% of billable hours lost to poor tracking, miscategorisation, or forgetfulness. For a firm billing at $200/hour with ten consultants, that could mean $200,000 to $400,000 in recovered annual revenue.
Price fixed-fee work with evidence
If you offer fixed-fee or retainer-based services, record both billable and non-billable hours. Otherwise, you have to estimate project profitability without knowing how much time the work consumed. Accounting practices can track time against clients, jobs, and budgets to spot underpricing before the next pricing decision.
How to reduce non-billable hours
Reduce non-billable time by removing avoidable work while protecting the administration, training, and business development your firm needs.
Automate administrative tasks
Invoicing, payment reminders, and data entry consume time each week. MinuteDock’s billing integrations sync tracked time to accounting software such as Xero, QuickBooks, and MYOB, so you enter the data once.
Consider automating:
- Invoice generation and sending
- Payment reminders and follow-ups
- Time entry reminders for your team
- Report generation and distribution
- Data syncing between your time tracking and accounting software
Batch similar activities
Switching between tasks takes time and attention. Instead of handling emails throughout the day, batch them into two or three dedicated blocks. Group similar non-billable tasks so you spend less time changing context.
Set clear boundaries for meetings
Set a few rules for internal meetings:
- Default to 25 or 50 minutes instead of 30 or 60
- Require agendas for all internal meetings
- Replace meetings with written updates when discussion isn’t needed
- Track meeting time to understand the true cost
Use templates and standardised processes
Build templates for common deliverables instead of recreating documents from scratch. Standardise recurring workflows and document them so the team can follow the same process.
Track time as you work
Reconstructing your timesheet at the end of the week takes time and produces less accurate records. Tracking time as you work, or using a running timer, captures more of the day and reduces the work required for time entry. MinuteDock’s timer sits in your browser, so starting and stopping the clock takes less than a second.
Frequently asked questions
What does “billable hours” mean?
Billable hours are the hours spent on work that can be charged to a client under your agreement with them. They usually include direct delivery work such as advice, research, design, development, preparation, or client-specific meetings.
What does “non-billable” mean?
Non-billable means the time is not charged to a client. It may still be necessary and valuable work, including administration, training, internal meetings, business development, and some client relationship activities.
Do you get paid for non-billable hours?
Employees usually do. Most firms pay salaries or wages that cover all working time, and billable-hour targets affect performance reviews and bonuses rather than the paycheck itself. Owners and freelancers absorb non-billable time as a business cost, which is one reason hourly rates need to cover more than the billable work alone.
What percentage of my work hours should be billable?
The target varies by role and industry, but most professional services firms aim for a utilization rate between 65-80%. According to SPI’s benchmarks, 75% is the optimal threshold for profitability without burnout. Senior staff and partners often have lower targets because of their business development and management responsibilities, while junior staff may have higher expectations.
Is 2,000 billable hours a year a lot?
Yes. Most law firms that set annual targets require 1,800 or 1,900 billable hours, and NALP’s research puts typical requirements between 1,700 and 2,300. Recording 2,000 billable hours means averaging about 40 billable hours every week for 50 weeks, which takes considerably more total working time once non-billable work is included.
Should I track time for fixed-fee projects?
Yes. Even when you’re not billing by the hour, tracking time helps you understand project profitability, price future work, and identify scope creep. Many firms discover that they have underpriced certain services once they start tracking time on fixed-fee engagements.
What’s the difference between utilization rate and realization rate?
Utilization rate measures the percentage of your available hours that you bill to clients. Realization rate measures the percentage of your billed value that reaches an invoice before write-offs and discounts. High utilization with low realization still means lost revenue.
Is travel time billable?
It depends on your firm’s policy and client agreements. Some firms bill travel at their full rate, others use a reduced rate, and some don’t bill it. Apply your policy consistently and explain it to clients before the work begins.
How do I handle time spent on multiple clients in one day?
Track time as you switch between clients instead of reconstructing your day later. Record brief interruptions and quick tasks as well because they accumulate across a day.
What if my non-billable hours are too high?
Start by analysing where the time goes. Separate necessary work, such as training and business development, from avoidable administration and inefficient processes. Remove or automate low-value activities before cutting work that supports the business over time.
Start tracking your billable hours with MinuteDock
Understanding the balance between billable and non-billable hours helps you run a more profitable professional services practice. A reliable time record shows the work behind that balance.
MinuteDock records billable hours by client and project, tracks your team’s utilization, and generates reports that show where your time goes.
Start with a clear record of how your firm spends its time.
