Understanding The Concept Of Billable Hours

By Author: David Brown
Total Articles: 21
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The bookkeeping and accounting services hired by a business manage several activities simultaneously. These include identifying and recording financial transactions in the correct books, creating invoices, paying bills and payables on time, collecting dues from debtors, handling inventory, employees' payslips, etc. The significance of each activity is immense, but they are detail-oriented and require keen attention. However, there is always a risk of error or discrepancy. One such attention-seeking and resource-intensive activity are tracking billable hours. While many employees get their salaries monthly, companies engage with non-employees, independent contractors, or even temporary personnel who get paid based on their work hours. Therefore, tracking productive time is crucial to compensate them for their services. 

What are billable hours?

As the name suggests, billable hours reflect the time given by the employee or non-employee to serve a business' needs. For example, attorneys at law charge fees based on hours they spend on a client's work. Similarly, freelance or part-time bookkeeping ...
... and accounting services providers may charge hourly for their services to firms. Both clients and the business negotiate the rates beforehand. For example, a bookkeeper can charge $80 per hour to maintain up-to-date records for the firm. 

Time tracking is essential for businesses to calculate billable hours. Firms need to consider the time spent by the service provider on their services. Companies must negotiate what obligations and responsibilities will be a part of the billable tasks and time-tracking. It can include:

Actual work performance to complete the project

Planning the project

Developing timelines

Time spent on research

Attending meetings

Reading, responding to work e-mails

Revising or making changes to business requests

It is crucial to track billable hours correctly. It can be challenging to do it manually. Therefore, businesses must consider investing in software like Xero accounting that simplifies the time-tracking and billable hours calculation process. 

While billable tasks would be a part of the contract, businesses must be diligent in knowing and noticing the inclusion of non-billable tasks. These activities are a part of the bookkeeping and accounting services providers' job description and thus should not get charged to the business. 

Developing proposals 

Pitching to other clients

Pre-contract consultations and meetings

Training courses for work beyond yours

 Team building and social events

Networking events

Work beyond the project scope

Correcting own avoidable errors

Administrative tasks like invoicing, payment processing, etc

Things to keep in mind while tracking billable hours:

Tracking billable hours for businesses involves practicing the following steps:

Know the hourly rate:

While looking for bookkeeping and accounting services providers, ensure the hourly rate does not exceed the market average. Many companies charge higher rates to offset the costs of non-billable tasks and gaining profits. Others charge low due to less experience or other reasons. In any way, the hourly rate should not hurt your budget.

Estimate the time it will take to complete your project. Then, going by the market average, choose the most affordable and efficient provider. 

Maintain an invoicing schedule:

Receiving invoices from the service provider after a fixed period allows businesses to budget and optimize cash flow. Therefore, clear it with the service provider beforehand for the invoicing process. It also helps you track time accordingly and pay for the hours covered in the period only. 

Ensure invoice accuracy:

Once you receive the invoice from the service provider, ensure all information is correct. The name, address, number, party's information, list of services, billable hours as negotiated, etc., must be mentioned clearly. 
Read More: https://www.whizconsulting.net/us/

We at Whiz Consulting always strive to provide what’s best for our clients. From accounting & bookkeeping services to payroll and taxation, we offer everything a business owner might need to run his business successfully. Our team of expert outsourcing accountants and bookkeepers help you handle your finances without any hassle.