Do you track your time? Or have you wondered “why bother”? Do you really know how much billable vs non-billable time is spent by you and your team?
Why Track Your Time
Whether you charge hourly or use a flat fee, time tracking is a key process you need to implement. If you charge a flat fee, how do you know what to charge if you don’t know how much time your team will spend on the job? Tracking your time helps you identify how much time is being spent on non-billable vs. billable time. Once you identify the difference, you and your team can see where time is being wasted on tasks and then focus on using your time more efficiently. Tracking time also can highlight changes in how you schedule jobs and possibly in adjusting who on your team is responsible for certain tasks. Like any new habit, you will need to work a bit harder in the beginning for time tracking to become automatic.
Rather than using time-based billing, you may use value-based billing, or project-based billing. In order to be profitable using either of these, even though you are not billing by the hour, you should track your time in order to know how many hours can be spent on the project to remain profitable.
Billable vs Non-Billable Time on a Project
Make sure everyone on your team is clear about the difference between billable and non-billable hours and that it is clearly outlined in the contract with your clients. Generally the following tasks fall under the “billable” category:
- Research
- Project planning
- Project execution
- Client meetings
- Consultations
- Other direct client communications
- Revisions requested by the client
- Travel time
Billable work includes all tasks directly related to the client’s project and can be charged as such. These are tasks for which your firm will be compensated – that you can put on the client’s invoice and that are clearly identified in your contract with the client.
Non-billable work would be any work performed by you or your team that, even if related to a billable task, cannot be billed to the client.
In order to find out how efficiently your business is running and how effectively time is being used, track time spent on the following activities:
- Reviewing phone, text, or email messages
- Developing and sending proposals to new clients
- Meeting with prospective new clients and consultants before signing a contract
- Team meetings and internal communications
- Fixing project-related problems
- Invoicing and processing payments
- Individual employee training
- Meeting with vendors when not specifically client-related
- Non-billable administrative duties
It is critical to track time spent on these tasks – particularly if you would like to increase your financial success while working fewer hours. You need to know where the time is being spent, as too often these tasks are absorbing your profits without you being aware.
How to More Easily Track Billable vs. Non-Billable Time
The first step is to negotiate with your client as to what tasks will be billable and which will not, and make sure this is very clear in the contract. The next thing is to be sure each member of your team knows what will be billable and what will not.
Whether you are billing hourly or by the project, with time tracking set up, you and your team can calculate the hours spent and you will know how many hours to bill or how much of that fixed fee can be used and stay profitable. It also allows everyone to track non-billable time.
In the past, time tracking was done on spreadsheets and was not only time-consuming but easily avoided or forgotten! Now, with the availability of time-tracking software, it’s much easier and more efficient for you and your team to track even small tasks such as answering phone calls or client emails. You are then able to calculate the total billable hours at the end of the project. It also soon becomes clear how much revenue-generating work is being done in your office.
How to Reduce Non-Billable Hours
Be sure everyone in your firm is efficient with their time. When you start tracking time you will be surprised where some of the time is being spent. Use automated solutions to get the job done more quickly so that you can increase your billable time. Though it may seem overwhelming at first, be sure that everyone in your office tracks every minute spent on a project.
There are a variety of time-tracking tools that make timekeeping much easier. A few of them are listed below, but before you decide which tool to use, ask other designers what they use and why they like it. Then check for these key features:
- Does it have automated time tracking in case you forget to stop and start the app?
- Does it integrate with your project management tools like Trello, Studio Designer, QuickBooks, etc.?
- If you bill by the hour, can it generate an invoice with your hours?
- Does it offer a simple learning curve with drag-and-drop functions and color-coded menus?
Time Tracking Tools to Consider
- Harvest: An expense and time tracking app – best for integrating time tracking with invoicing. It also integrates with a number of business management services, among those being Asana, Slack, Trello, and QuickBooks.
- Studio Designer’s Time Tracking Timer: You can manage and track your team’s time and tasks all in one place along with all of the other features Studio Designer offers.
- Paymo: Works well for teams that need employee time tracking along with project management.
- Toggl: A simple time-tracking app that also can generate invoices.
To encourage your team (and yourself!) to create the habit of time tracking be sure your team understands that more billable hours = more profit and success for the firm, which translates into more opportunity for your team to share in the firm’s growth and financial success.