How to track billable hours - a step-by-step guide
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This document provides a comprehensive guide for freelancers and small businesses on how to accurately track billable hours. It outlines steps such as defining billable activities, setting up a time logging system, and regularly reviewing time entries to ensure accuracy. Additionally, it covers invoicing procedures for billable hours and emphasizes the importance of distinguishing between billable and non-billable activities.
How to track billable hours - a step-by-step guide
- 1. How to track billable hours: a step-by-step guide
- 2. Accurately tracking billable hours is essential for freelancers and small businesses. This guide covers everything you need to know about getting started with time tracking for billable hours.
- 3. Set up a Time Logging System Before you start tracking billable hours, you should prepare well. Following section will guide you through the essential steps to take before you start tracking your time. 1
- 4. Define billable activities To track your billable hours accurately, you need to differentiate billable and non-billable activities. Typical billable activities include: 1. Client meetings 2. Project work 3. Project management 4. Business travel 5. Administrative tasks 1 Set up a Time Logging System
- 5. Identify billable hours’ capacity It’s essential to set a goal for the number of billable hours you aim to achieve within a specific period. This will help you stay on track and measure your progress. Consider factors like your workload and the number of clients you have. 1 Set up a Time Logging System
- 6. Choose a time-tracking method There are various time-tracking methods to choose from, and the method you choose will depend on your personal preference. The most popular methods are: 1. Time-tracking apps/software 2. Manual timesheets 3. Timers 4. Activity trackers 5. Project management software 1 Set up a Time Logging System
- 7. Set up the time-tracking system Once you’ve chosen a time-tracking method, set up the system you will use to record your billable hours. Elements that should be included are: 1. Purpose of time tracking 2. Time tracking system 3. Time tracking policies 4. Billable and non-billable activities 5. Time tracking for remote work 6. Training and support 7. Privacy and confidentiality 1 Set up a Time Logging System
- 8. Enter All Billable Hours Once the time-tracking system is in place and employees are trained on how to use it, the next step is to start logging billable hours. This will help keep everything precise and prevent inaccurate hours, and also help you better evaluate time needed to finish tasks. 2
- 9. Establish a routine It's important to establish a routine for logging time. By establishing a routine, employees can help to ensure that they don't forget to log hours or miss any billable activities. 2 Enter All Billable Hours
- 10. Start the timer When beginning a billable activity, employees should start the timer in the time tracking system. This can help to ensure that all billable hours are accurately recorded and that no time is missed. 2 Enter All Billable Hours
- 11. Note billable activities As employees work on billable activities, they should take notes on what they are working on, any milestones achieved, and any issues or challenges encountered. This can help to provide additional context for billable hours and make it easier to categorize time entries accurately. 2 Enter All Billable Hours
- 12. Stop the timer when activities change When moving from one billable activity to another, employees should stop the timer for the first activity and start a new timer for the next activity. This can help to ensure that time is accurately allocated to each activity and that there are no overlaps or gaps in time logs. 2 Enter All Billable Hours
- 13. Review time entries regularly It's important to review time entries regularly to ensure that they are accurate and consistent. Regular review can help to identify areas for improvement in terms of time management and project efficiency. 2 Enter All Billable Hours
- 14. Track Non-Billable Hours for Efficiency Keeping a record of how many non-billable hours each client consumes will provide helpful insights. Common non-billable activities are: 1. Internal meetings 2. Administrative tasks 3. Business development 4. Recruiting 5. Training and development 6. Sick or vacation time 3
- 15. Tracking Costs and Expenses for Comprehensive Profits It’s important to also track associated costs and expenses. If a project involves travel, materials, meals, and other related expenses, be sure to include those in your billing process. 4
- 16. Identifying billable and non-billable expenses Before you start tracking expenses, it's important to identify which expenses are billable and which are not. Billable expenses include travel expenses for client meetings, equipment rental for a specific project, or materials purchased for a specific project. Non-billable expenses might include general office supplies, employee salaries, or rent. 4 Tracking Costs and Expenses for Comprehensive Profits
- 17. How to track expenses There are many methods for tracking expenses, including manual methods like using a spreadsheet or notebook and digital methods like using accounting software or expense tracking apps. 4 Tracking Costs and Expenses for Comprehensive Profits
- 18. Invoicing for Billable Hours After all your event details are collected and project information entered into the software, it’s time to generate an invoice. Following section will introduce you to the most important steps. 5
- 19. Review time entries against the client’s contract Before creating an invoice, it's important to review the client's contract to ensure that all billable hours are accounted for. This can help avoid any confusion or disputes. 5 Invoicing for Billable Hours
- 20. Check billable hours and billing rate Once the client's contract has been reviewed, it's time to determine the billable hours and billing rate. This should be based on the agreed- upon terms in the contract, including any hourly rates, project fees, or other billing arrangements. 5 Invoicing for Billable Hours
- 21. Create and send a professional invoice Once the hours and billing rate have been determined, it's time to create and send the invoice. The invoice should be clear, easy to understand, and include any payment instructions or terms. 5 Invoicing for Billable Hours
- 22. Follow up on unpaid invoices This can include sending reminders or notices to clients, as well as working with them to resolve any issues or disputes. By following up on unpaid invoices, businesses can ensure that they are paid for their work and maintain positive relationships with their clients. 5 Invoicing for Billable Hours
- 23. Tracking billable hours is an essential part of managing a successful business. The key to successful time tracking is to establish clear goals, understand employee capacity, set up a time- tracking system, and regularly review and adjust the process as needed. By following this guide, businesses can ensure that their time-tracking process is accurate, efficient, and effective.
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