How To Track Billable Hours So Clients Actually Pay You

You're working flat out. Your calendar is packed, you're answering client emails at 9 PM, and lunch was something you ate standing up. But here's the frustrating part: when you sit down to invoice, you can't quite remember what you actually did on Tuesday afternoon.

You're not alone. Research from Statista and Sage found that professional services firms worldwide average just 68.9% billable utilization. That means nearly a third of potential billable time isn't making it onto invoices, not because the work isn't happening, but because it's not being captured.

If you're an accountant juggling multiple client reconciliations, a lawyer tracking time across dozens of matters, or a consultant switching between projects, you know exactly how this happens. Those 10-minute client calls, quick email responses, and "I'll just check this one thing" moments add up fast, and they're the first things to slip through the cracks.

The good news? Tracking billable hours isn't complicated once you know what to capture and how to capture it. This guide walks you through everything professional services firms need to know, from the basics to the metrics that actually matter for your bottom line.

What Are Billable Hours?

Billable hours are the time you spend on work that you can charge to a client at your agreed-upon rate. For professional services firms, this typically includes time spent delivering services, researching for specific client matters, preparing documents, and communicating directly with clients about their work.

The concept sounds simple enough. But in practice, the line between billable and non-billable time gets blurry fast, especially when you're switching between clients throughout the day or handling tasks that benefit multiple projects.

Two things make billable hours actually work as a billing model:

Tracking your time accurately and consistently
Having clear client agreements that spell out exactly what you charge for

Without both of these in place, you'll either leave money on the table or end up in awkward billing disputes with clients.

Billable vs Non-Billable Hours: Understanding the Difference

If you bill by the hour, you obviously track your billable hours to turn them into invoices. But what about all the work that doesn't fit neatly into a client project? Tracking your non-billable hours is just as important as tracking client work.

What Counts as Billable Time

Billable hours are time directly dedicated to work for a specific client or matter. This is what your client will be charged for because it's work specifically being done for them.

Common billable activities include:

Delivering the actual service (preparing tax returns, drafting contracts, conducting analysis)
Client-specific research and preparation
Client meetings and calls
Document review and revision
Travel time for client work (depending on your agreement)
Client correspondence and email communication

What's Typically Non-Billable

Non-billable hours are work hours you spend that won't be directly charged to any client. These are necessary for running your practice, but they don't generate direct revenue.

Examples of non-billable time include:

Internal team meetings
Business development and marketing activities
Administrative tasks and practice management
Professional development and training
General networking and relationship building
Preparing proposals for prospective clients

Why Non-Billable Tracking Matters

Tracking non-billable hours gives you visibility into where your time actually goes. You might discover you're spending 15 hours a week on internal meetings that could be emails, or that certain administrative tasks could be automated or delegated.

Many firms find that consistent tasks they do for every client, like onboarding processes or progress updates, could be included as billable time in future agreements. You won't know unless you track it.

Whatever you decide counts as billable versus non-billable, outline it clearly in all your client agreements. Ambiguity here leads to billing disputes later.

How to Tell If Your Time Is Billable

Time tracking starts with knowing which tasks you can reasonably charge clients for. Here's a quick gut-check you can run through when you're not sure whether to bill for something:

Ask yourself:

Does this contribute directly to the final deliverable or outcome the client is paying for?
Is this part of the planning or preparation specifically for this client's work?
Am I researching for this client's project, or for my own general knowledge?
Does this meeting involve the client or directly help me complete their work better?
Is this something I'm uniquely qualified or hired to do for this client?
Is this service covered in our agreement, or have I added it on?

If you're answering "no" to most of these questions, you're probably looking at non-billable time. When in doubt, check your client agreement and be conservative. It's easier to write off time you tracked than to bill for time you didn't capture.

How Professional Services Firms Track Billable Hours

Generic time tracking advice doesn't cut it for professional services. Your time isn't just about personal productivity; it's directly tied to revenue, client billing, and the health of your practice.

When a freelance writer loses 30 minutes, it's frustrating. When an accounting firm loses 30 minutes of unbilled partner time across a team of five people every single day, that adds up to 12.5 hours per week, or roughly 650 hours per year. At an average billing rate of $200 per hour, that's $130,000 in lost annual revenue. Suddenly we're talking about real money.

Here's how different professions approach billable hours tracking.

For Law Firms and Legal Practices

Lawyers have been billing by the hour since long before time tracking apps existed, which means the legal profession has some of the most established (and sometimes most painful) time tracking requirements.

Legal time tracking typically involves:

Tracking time in six-minute increments (0.1 hours) or another billing increment specified by client agreements
Associating every Time Entry with a specific matter, not just a client
Including detailed narrative descriptions of work performed (many clients require this)
Separating attorney time by timekeeper and billing rate
Maintaining records for potential audits or billing disputes

Clio's 2024 Legal Trends Report found that solo and small law firms average 86% realization rates (the percentage of billable work that ends up on an invoice) and 90% collection rates. That sounds good until you realize the remaining 14% of billable hours never gets invoiced at all, and 10% of what gets invoiced never gets paid.

The stakes are high. Poor time tracking in law firms doesn't just mean lost revenue. It can mean trust accounting compliance issues, client disputes, and even malpractice exposure if you can't demonstrate what work was done.

For Accounting and Bookkeeping Firms

Accountants and bookkeepers face a unique challenge: your busy season is wildly different from the rest of the year. During tax season or month-end closes, you're switching between dozens of clients daily. That context-switching is where billable time gets lost.

Effective time tracking for accounting firms means:

Tracking time to specific clients and service types (tax prep vs. advisory vs. bookkeeping)
Capturing small increments during busy season when you're bouncing between clients
Distinguishing between billable client work and non-billable practice management
Building time tracking into your workflow so it doesn't become one more thing to do at 10 PM

Many accounting firms bill on fixed fees for compliance work, but still track time to understand true profitability by client and service line. You might quote a flat fee for a tax return, but if you're tracking time, you'll know whether that client is actually profitable or eating into your margins.

For Consultants and Agencies

Consultants often work on longer engagements with retainers, project-based pricing, or blended rate structures. This makes time tracking both simpler (fewer clients to switch between) and more critical (scope creep is a real threat).

Consultant time tracking priorities include:

Tracking against project budgets and retainer hours
Capturing time by project phase or deliverable
Monitoring scope to catch scope creep before it becomes a problem
Building visibility for clients who want to see where their retainer is going

For agencies juggling multiple clients and team members, time tracking becomes essential for resource planning, not just billing. You need to know who's overloaded, which projects are eating more hours than expected, and whether you're staffed correctly for incoming work.

Setting Up Your Billable Hours System

Getting paid starts with having a system that actually captures your time. Here's how to set one up that works.

Set Your Hourly Rate

If you're not sure what to charge, time tracking can help you figure it out. Start by tracking how long tasks actually take you. This shows you what you're really earning per hour, whether that number is sustainable, and where you might be undervaluing your work.

Once you have data, you can set rates with confidence and back them up when clients push back. Make sure your rate accounts for taxes, overhead, and the non-billable time you'll inevitably spend on each client relationship.

Create Clear Client Agreements

Your engagement letter or client agreement should spell out exactly what you charge for. Include:

Your hourly rate (or rates, if you have different team members billing at different levels)
What activities are included in your billable time
Your billing increments (six-minute, quarter-hour, etc.)
How you handle expenses and disbursements
Your invoicing schedule and payment terms

The more specific you are upfront, the fewer billing conversations you'll have later.

Choose Your Tracking Method

You have options here, ranging from simple to sophisticated.

A spreadsheet works if you're tracking time for yourself and have the discipline to update it consistently. It's manual and error-prone, but it costs nothing.

Time tracking software like MinuteDock gives you a Timer you can start and stop as you work, automatic timestamps, and the ability to assign Time Entries to specific clients and projects. It's faster and more accurate than manual tracking, especially if you're switching between clients throughout the day.

The best system is the one you'll actually use. If you won't remember to update a spreadsheet, a Timer that's always visible is probably worth the investment.

Establish an Invoicing Schedule

Your invoicing schedule depends on your cash flow needs and your clients' expectations. Consider:

Do you have monthly overhead costs that require consistent revenue?
Do clients expect monthly invoices, or are they fine with billing at project completion?
Should you require a deposit or retainer before starting work?
Do certain clients have accounting departments that only process invoices on specific schedules?

Whatever you decide, put it in your client agreement and stick to it. Consistent invoicing builds client expectations and keeps your cash flow predictable.

Understanding Your Billable Metrics

Tracking hours is step one. Understanding what those hours mean for your business is where it gets interesting.

Billable Utilization Rate

Your billable utilization rate is the percentage of your available working hours that you actually bill to clients. It's calculated as:

Billable Utilization = (Billable Hours ÷ Total Available Hours) × 100

If you work 40 hours a week and bill 30 of them, your utilization rate is 75%.

Industry benchmarks suggest that professional services firms should target 70-75% billable utilization for optimal balance between productivity and avoiding burnout. Data from the 2025 SPI Professional Services Maturity Benchmark shows that utilization has been declining industry-wide, dropping from 73.2% in 2021 to just 68.9% in 2024, well below the 75% threshold most firms consider optimal.

Why does this matter? Because it tells you how much of your capacity is generating revenue. A low utilization rate might mean you're spending too much time on non-billable work, you're not capturing all your billable time, or you simply don't have enough client work.

Realization Rate

Your realization rate measures how much of your billed time you actually collect. It's calculated as:

Realization Rate = (Revenue Collected ÷ Amount Billed) × 100

If you bill $10,000 but only collect $8,500 after write-downs and adjustments, your realization rate is 85%.

Clio's research on mid-sized law firms found average realization rates of 83% and collection rates of 84%. That means 17% of billable hours never make it onto invoices, and another 16% of invoiced amounts never get collected.

Professional services firms lose revenue at this stage for several reasons: write-downs for work that took longer than expected, discounts to maintain client relationships, and invoices that simply don't get paid. Tracking your realization rate helps you identify which clients and project types have the best (and worst) collection outcomes.

Time Leakage

Time leakage is the billable time that gets worked but never makes it onto an invoice. It's the silent revenue killer for professional services firms.

Industry research suggests that professional services firms lose between 10% and 20% of their billable hours to poor tracking, miscategorization, or simple forgetfulness. For a firm billing $200 per hour with ten consultants, that could mean $200,000 to $400,000 in lost annual revenue.

Common sources of time leakage include:

Small tasks that feel "too quick to track" but add up
Work done outside normal hours that doesn't get recorded
Rounding down when estimating time after the fact
Forgetting to track time when switching between clients rapidly

The fix for time leakage is tracking in real time instead of reconstructing your day later. Even a quick task deserves a Time Entry if it's billable work.

How to Increase Billable Hours Without Burning Out

More billable hours means more revenue, but you can't just work more hours forever. Here's how to increase what you capture without sacrificing your sanity or your service quality.

Track Every Billable Minute

Approximate time won't cut it when you're billing by the hour. Clients can ask exactly where their money went, and you should be able to tell them. This means tracking as you work, not reconstructing your day at 6 PM.

Tools like MinuteDock's Timer let you start tracking with one click and switch between clients throughout the day. Every minute gets captured to the right client and project automatically.

Track in Real Time

The longer you wait to record your time, the less accurate it becomes. Research on memory and recall shows that people forget over 56% of information within just one hour. By the end of the day, reconstructing your morning feels like archaeology.

A survey of over 500 professional services employees by Chrometa found that participants estimated they ultimately billed for just 67% of their actual billable time. That's a third of your work disappearing because you couldn't remember it happened.

Real-time tracking also helps you stay within client budgets. When you can see hours accumulating against a budget limit, you're less likely to blow past it and have an uncomfortable conversation later.

Know Where Your Non-Billable Time Goes

Track your non-billable time too. Not because you'll bill for it, but because you need to know where it's going. You might find:

Recurring tasks that could be automated or delegated
Internal meetings that don't need to happen
Administrative work that a less expensive team member could handle
Activities you do for every client that could be included in your billable scope

Batch Similar Tasks

Context-switching kills productivity and creates opportunities for time leakage. When possible, batch similar activities together. Handle all your client emails in one block. Do all your document review for the day in one focused session. You'll work faster and capture more accurate time when you're not constantly switching gears.

Creating Transparent Invoices

Detailed, transparent invoices reduce billing disputes and build trust with clients. Your invoices should show:

The date and description of each Time Entry
The amount of time spent
The rate charged
The total for each line item and the invoice overall

Clients shouldn't have to guess what they're paying for. The more detail you provide, the fewer questions you'll get, and the faster you'll get paid.

With time tracking that integrates with invoicing, you can turn your tracked hours into professional invoices without retyping everything. Your Time Entries flow directly into invoice line items with accurate descriptions and calculations.

Frequently Asked Questions About Billable Hours

What percentage of my time should be billable?

This depends on your role and your firm's structure. Partners and principals typically target 50-60% utilization because they spend more time on business development and firm management. Associates and staff members usually target 70-80%. In reality, industry benchmarks show many professionals fall short of these targets, averaging around 69% utilization.

How do law firms track billable hours?

Most law firms track time in six-minute increments (0.1 hours) using specialized legal practice management or time tracking software. Each Time Entry gets assigned to a specific matter with a detailed narrative description. Many clients, especially corporate legal departments, require this level of detail before they'll pay invoices.

What's the difference between billable hours and chargeable hours?

These terms are often used interchangeably, but some firms distinguish between them. Billable hours are time you can charge to a client. Chargeable hours are time that contributes to client work but might not appear as a line item on an invoice, such as time covered under a fixed-fee arrangement.

How do I bill clients for administrative time?

Most professional services firms don't bill for internal administrative tasks. However, client-specific administrative work, like preparing engagement letters, setting up client files, or coordinating schedules for client meetings, might be billable depending on your agreement. Define this upfront in your engagement letter to avoid surprises.

What is a good realization rate?

A healthy realization rate for professional services firms is typically 85-95%. Clio's research shows solo and small law firms average 86% realization, while mid-sized firms average 83%. Rates below this suggest you're discounting too heavily, experiencing scope creep, or have collection problems. Track realization by client and service type to identify where you're losing revenue.

How can I reduce time leakage in my firm?

The biggest fix is tracking time in real time rather than reconstructing it later. Other strategies include setting daily or weekly time entry requirements for your team, using timers that make tracking easy, and reviewing unbilled time reports regularly to catch missing entries before they're forgotten.

Key Takeaways

Tracking billable hours isn't just about getting paid. It's about understanding where your time actually goes, ensuring you're charging fairly for your work, and building a sustainable professional services practice.

Here's what matters most:

Define billable versus non-billable clearly in your client agreements
Track time as you work, not at the end of the day
Monitor your utilization and realization rates to understand true profitability
Create detailed, transparent invoices that clients can understand
Use time tracking data to identify inefficiencies and opportunities

Ready to stop leaving money on the table? Start tracking your billable hours with MinuteDock and see exactly where your time goes.