Billable Rates

Learn what billable rates are, how to calculate them, and how to set them in TMetric for accurate client billing and project profitability.

By Victoria Avdieieva

Billing Rates

What Are Billable Rates?

Billable rates are the fees professionals or businesses charge clients for their time and services, usually on an hourly or project basis. They cover not just wages but also overhead and profit.

Key Points of Billable Rates

  • Typically calculated hourly, daily, or per project.
  • Include wages, overhead costs (e.g., office, tools, etc.), and profit.
  • Ensure businesses cover costs while generating profit.
  • Reflect not just cost, but also expertise and client value.

Example of Billable Rate in Use

For example, a consulting firm charges clients $100 per hour for a consultant’s time.

  • The consultant works 5 hours on a client project.
  • Billable rate = $100/hour × 5 hours = $500 billed to the client.

How to Use Billable Rates in TMetric

Here you will find a step-by-step guide on how to track billable rates in TMetric.

1. Create a project and assign billable rates at the workspace, project, client, or member level

Project Billing

2. Track time with the TMetric timer or log manually

Time Page

3. Export reports or generate invoices directly

New Invoice

4. Monitor profitability via dashboards

Projects View

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Benefits of Using Billable Rates

  • Accurate Revenue Tracking
  • Profitability Management
  • Time Valuation
  • Client Transparency
  • Resource Planning
  • Business Growth

Frequently Asked Questions about Billable Rates

What activities are considered billable?

Here are common examples of billable activities:

  • Client communications: emails, calls, or meetings about their project.
  • Project work: drafting documents, coding, designing, or research.
  • Preparation and review: analyzing client data, creating reports, revising deliverables.
  • On-site or virtual consultations: giving advice or guidance.
  • Business trips: if they are specifically for client work and agreed in advance.

What is non-billable time?

Non-billable time is the time you spend on work that supports your business but cannot be charged to a client. Examples of non-billable time:

  • Administrative tasks: scheduling, invoicing, filing.
  • Internal meetings: team catch-ups, company updates.
  • Business development: marketing, networking, prospect calls.
  • Training & learning: professional development, courses.
  • Employee management: hiring, performance reviews.

Why are billable rates important?

Billable rates are crucial because they directly impact a business’s revenue, profitability, and resource management:

  • Revenue: They determine how much income a business earns from client work.
  • Profitability: Correct rates ensure projects cover costs and deliver a profit margin.
  • Financial Planning: Support accurate budgeting, forecasting, and pricing decisions.

How do I calculate billable utilization?

Billable utilization tells you what percent of your work time actually earns revenue. It measures how much of your available work time is spent on billable tasks and is calculated by the formula:

Billable Utilization (%) = Billable Hours/Total Available Work Hours ×100

Example:

  • Total available hours in a month: 160 (40 hrs/week × 4 weeks).
  • Billable hours worked: 120.
  • Billable Utilization = 120/160 × 100 = 75%

Does tracking billable rates affect payroll?

Yes, tracking billable rates can indirectly affect payroll, though it doesn’t change an employee’s salary directly.

Examples of how it can affect payroll:

  • Employees may earn extra based on billable hours or project profitability.
  • Accurate tracking ensures proper calculation of overtime for billable work.
  • Helps managers allocate resources efficiently, which can affect payroll budgets.
  • Comparing billable revenue to payroll costs informs adjustments in compensation or workload.