Definition
Billable Hours
Billable hours are hours of work performed for a client that can be charged to them under the terms of the engagement. Non-billable hours are hours spent on work that cannot or should not be invoiced — internal meetings, proposals, training, or work outside the agreed scope.
Why the billable/non-billable distinction matters
Not all time spent on a project generates revenue. Internal status calls, revisions caused by scope misunderstanding, and onboarding new team members all take time but cannot be billed. Tracking billable and non-billable time separately gives a clear picture of actual project profitability and reveals where non-billable overhead is concentrated.
How to classify time correctly
The classification should be made at the point of time entry, not at invoice time. When a team member logs hours, they should indicate whether the work falls within the agreed scope. This is easier when the project scope is documented clearly at the start: if the engagement agreement specifies what is included, classifying time is straightforward. Rework caused by the client changing requirements is typically billable; rework caused by the team's own errors is not.
Billable utilisation: the key metric
Billable utilisation is the ratio of billable hours to total available hours for a given period. A person working 40 hours per week who logs 28 billable hours has a utilisation of 70%. For most service businesses, a healthy utilisation rate falls between 60% and 80%. Below 60% suggests too much non-billable overhead. Above 80% consistently is unsustainable and leads to burnout.
Turning billable hours into invoices
The practical value of tracking billable hours comes at invoice time. If hours are classified correctly throughout the project, generating an invoice is a review-and-send step rather than a reconstruction. The billing system shows the billable hours not yet invoiced, applies the agreed rates, and produces the line items. This reduces errors, speeds up invoicing, and makes it easier to invoice more frequently.
How Effici helps
How Effici handles billable and non-billable time
Billable flag on every time entry
When logging time in Effici, each entry is marked as billable or non-billable. The project dashboard separates the two so you can see total hours and billable hours at the same time.
Invoice proposals from unbilled billable hours
When it is time to invoice, Effici surfaces all billable hours not yet included in an invoice for that project. You review the proposal, adjust if needed, and send — without manually pulling hours into an invoice template.
Utilisation visible across the team
The reporting view shows billable and non-billable hours per person and per project. This makes it easy to monitor utilisation and identify where non-billable time is concentrating.
Related features
Time Tracking
Billable time tracking per project.
Log hours and classify each entry as billable or non-billable. Invoice proposals pull from unvoiced billable hours automatically.
Learn more →Project Reporting
Utilisation and billing efficiency reports.
See billable vs non-billable time per person and project. Monitor utilisation across the team.
Learn more →FAQ
Common questions.
What counts as a non-billable hour?
Non-billable hours include internal meetings not covered by the client agreement, time spent on proposals for future work, training, and work that falls outside the agreed project scope. The exact definition depends on your engagement agreements — the clearer those are, the easier it is to classify time correctly.
Should I track non-billable hours at all?
Yes. Non-billable hours are a real cost of delivering client work. Tracking them allows you to measure actual project profitability, understand overhead, and price future projects more accurately. A project where 40% of time is non-billable is significantly less profitable than one where 20% is non-billable, even if billed rates are the same.
How do billable hours affect project profitability?
Billable hours generate the revenue that covers both the cost of delivering the work and the overhead of running the business. If a project's billable hours fall short of the budget, either revenue is lower than planned or costs are higher — both reduce margin. Tracking billable hours in real time helps catch this drift early.
Can I reclassify hours from non-billable to billable after logging them?
In most time tracking systems, including Effici, you can edit the billable status of past entries before they are included in an invoice. This is useful when scope is renegotiated mid-project or when initial classification was incorrect.