You're at your desk by 8am. You work through lunch. You finally close your laptop at 6pm. But when you look at your timesheet, somehow only a handful of those hours can actually be billed to clients.
Sound familiar? You're not alone. According to Clio's 2024 Legal Trends Report, the average lawyer captures just 2.9 billable hours in an eight-hour workday—a utilization rate of only 37%. And it's not just law firms. Research from Tribes.AI found that nearly one in five billable hours simply aren't recorded across the professional services sector, costing businesses an estimated $63,807 per employee per year.
When professional services firms think about billable vs non-billable hours, they often focus entirely on the billable side. That makes sense—those are the hours that show up on invoices and keep the lights on. But understanding the full picture of how your time gets spent? That's where the real insights live.
Whether you're running an accounting practice, managing a law firm, or consulting for clients across multiple projects, getting a handle on both billable and non-billable hours is essential for building a profitable, sustainable business. Let's break down exactly what these terms mean, how to track them effectively, and what you can do to make every hour count.
What Are Billable Hours?
Billable hours are the time you spend working directly on client projects or matters that you'll charge for. It's the work your clients expect to pay for—the core service you've been hired to deliver.
For a bookkeeper, billable hours might include reconciling accounts, processing payroll, or preparing monthly financial statements. For a lawyer, it's drafting contracts, appearing in court, or conducting legal research for a specific case. For a consultant, it's running workshops, analysing data, or building out strategic recommendations.
The key distinction is that billable time is directly attributable to a specific client engagement and represents work that provides clear, tangible value to that client. When you're billing accurately, these are the hours that become line items on your invoices.
What Are Non-Billable Hours?
Non-billable hours are all the other working hours that don't get charged to clients. These aren't wasted hours by any means—they're often essential for running your business and delivering quality work. They just don't appear on client invoices.
Common examples of non-billable time include:
Internal operations and administration:
- Staff meetings and team catch-ups
- Business development and networking
- Internal accounting and bookkeeping for your own firm
- Hiring, onboarding, and HR activities
- IT troubleshooting and system maintenance
Professional development:
- Training sessions and continuing education
- Industry conferences and seminars
- Studying for certifications or credentials
- Mentoring junior staff
Client relationship activities (often non-billable):
- Initial consultations and scoping calls
- Proposal and pitch preparation
- Progress update meetings (depending on your billing practices)
- Relationship-building conversations
Administrative tasks:
- Invoicing and collections
- Filing and documentation
- Email management
- Travel time (policies vary by firm)
The tricky part? Different firms have different policies about what counts as billable. Some law firms bill for travel time; others don't. Some consultancies include client calls in their billable hours; others treat them as relationship management. Knowing your own boundaries—and communicating them clearly to clients—matters more than following any universal rule.
Understanding Billable Utilization Rate
Knowing your billable hours is useful, but knowing your billable utilization rate tells you so much more about your firm's efficiency and profitability.
Your billable utilization rate is the percentage of your available working hours that you actually bill to clients. It's one of the most important metrics for any professional services business.
How to Calculate Your Billable Utilization Rate
Billable Utilization Rate = (Billable Hours ÷ Total Available Hours) × 100
Let's say you work 40 hours in a week and bill 28 of those hours to clients. Your utilization rate would be:
(28 ÷ 40) × 100 = 70% utilization
What's a Good Utilization Rate?
This varies by industry and role. According to Statista's analysis of professional services data (sourced from Kimble and Sage), the global average billable utilization across professional services organizations stood at 68.9% in 2023—down from a high of 73.2% in 2021. The SPI Professional Services Maturity Benchmark identifies 75% as the optimal threshold for sustainable profitability.
Here's how that breaks down by industry:
- Accounting and bookkeeping firms: The AICPA's 2023 MAP Survey reported a median utilization of 59.6% across accounting practices, with a target range typically around 65-75%.
- Law firms: Clio's data shows the average utilization for law firms is just 37%—which sounds alarming until you realise this measures billable hours against an eight-hour day, including all the non-billable activities that lawyers must perform. More traditional law firm targets expect associates to hit 1,800-2,000 billable hours annually.
- Consulting and agencies: Generally expect 70-80% utilization, with industry benchmarks suggesting that pushing beyond 80% consistently leads to burnout and turnover.
- Freelancers and solos: Often achieve 50-70% due to wearing multiple hats—you're the rainmaker, the accountant, and the person doing the actual client work.
Keep in mind that 100% utilization isn't the goal—and it's not sustainable. Non-billable time for admin, training, and business development is necessary for long-term success. The sweet spot is maximising billable hours without burning out your team or neglecting the activities that keep your business running.
What About Realization Rate?
While we're talking metrics, let's clear up a common point of confusion. Your utilization rate and your realization rate are related but different.
Realization rate measures how much of your billable time actually gets invoiced (and ideally, paid). It accounts for discounts, write-offs, and hours that never make it onto a bill.
How to Calculate Realization Rate
Realization Rate = (Revenue Billed ÷ Value of Billable Hours Worked) × 100
For example, if you tracked 100 billable hours at $150/hour ($15,000 value) but only invoiced $12,000 due to write-offs and discounts, your realization rate would be 80%.
According to Clio's 2024 benchmarks, the average realization rate for law firms is 88%. That means firms are losing 12% of their potential revenue before they even send the invoice. Solo and small firms average around 86% realization and 90% collection rates—which sounds decent until you calculate what that 14% of unbilled hours and 10% of uncollected invoices actually costs you over a year.
Understanding both rates gives you the full picture: utilization tells you how efficiently you're using your time, while realization tells you how effectively you're turning that time into actual revenue.
Industry-Specific Approaches to Billable Hours
The way you handle billable vs non-billable hours should reflect the norms and expectations of your industry. Here's how different professional services typically approach it:
For Accountants and Bookkeepers
Accounting and bookkeeping firms often work with a mix of recurring engagements (monthly bookkeeping, payroll) and project-based work (tax preparation, audits). This creates some unique considerations.
Monthly retainer clients may have hours "included" in their fee, making utilization tracking more nuanced. Tax season creates dramatic fluctuations in billable hours. Continuing professional education (CPE) requirements mean regular non-billable training time. Software setup and data migration for new clients is sometimes billable, sometimes not.
Many accounting professionals find that tracking all their time—even for fixed-fee engagements—helps them understand true project profitability and price future work more accurately.
For Lawyers and Law Firms
Legal professionals often face the most rigorous billable hour requirements. According to NALP's research, billable hour requirements at law firms typically range from 1,700 to 2,300 hours annually, with most offices requiring either 1,800 or 1,900 hours. The Yale Law School Career Development Office notes that larger firms often push toward 2,000-2,200 hours for associates seeking top compensation.
Key considerations for legal billing:
- Ethics rules require accurate time records and reasonable billing
- Many jurisdictions have specific requirements for how time must be documented
- Pro bono work is tracked separately but still represents important time allocation
- Travel time billing varies significantly by firm and client agreement
The pressure to hit billable targets can be intense, which makes efficient time tracking for lawyers even more important.
For Consultants and Agencies
Consulting work often involves significant non-billable time for proposal development, thought leadership, and client relationship building. Common approaches include:
- Proposal and pitch time is typically non-billable but tracked for business development analysis
- Internal research and methodology development may be non-billable but creates future value
- Some firms have "investment time" budgets for building expertise in new areas
- Client entertainment and relationship management hours are tracked but not billed
For consultants, the balance between billable delivery work and non-billable business development is particularly important—you can't win new work if you're at 100% utilization on current projects.
Why Tracking Non-Billable Hours Actually Matters
It's tempting to only track the hours you'll bill for—less admin work, right? But here's why tracking all your hours pays off.
Identify Which Clients Are Actually Profitable
Some clients require significantly more hand-holding, revisions, or communication than others. Without tracking non-billable time by client, you might think Client A and Client B are equally profitable because they're both paying the same rate. But if Client A requires hours of non-billable meetings and scope discussions while Client B is self-sufficient, your true margins look very different.
This insight helps you make better decisions about pricing, client selection, and where to focus your energy.
Spot Hidden Billable Hours
When you track everything, you often discover time that probably should be billable but has been slipping through the cracks. That "quick call" with a client that turned into a 45-minute strategy session? The email chain where you provided detailed advice? These might be worth billing for—or at least accounting for when you set your rates.
Research suggests that firms with proper time tracking practices can increase billable hour capture by 20-30% within 90 days of implementation. That's real revenue that was always there—just never making it onto invoices.
Find Efficiency Opportunities
Tracking non-billable time helps you see where your firm's hours are really going. If your team is spending 15 hours a week on internal meetings, is that time well spent? Could some of those meetings be emails? Could processes be streamlined?
According to industry analysis, firms that closely track non-billable time often identify 15-25% of billable hours that were being lost to poor tracking, miscategorisation, or simple forgetfulness. For a firm billing at $200/hour with ten consultants, that could mean $200,000 to $400,000 in recovered annual revenue.
Price Fixed-Fee Work Accurately
If you offer any fixed-fee or retainer-based services, understanding your true time investment is crucial. Without tracking both billable and non-billable hours, you're essentially guessing at project profitability—and probably undercharging for complex engagements.
How to Reduce Non-Billable Hours (Without Sacrificing Quality)
Reducing non-billable time isn't about cutting corners or skipping important activities. It's about working smarter and eliminating inefficiencies. Here are proven strategies:
Automate Administrative Tasks
The hours you spend on invoicing, payment reminders, and data entry add up quickly. Tools that automate these processes can reclaim significant time for billable work. MinuteDock's billing integrations sync your tracked time directly to accounting software like Xero, QuickBooks, and MYOB—so you're not manually entering the same data twice.
Consider automating:
- Invoice generation and sending
- Payment reminders and follow-ups
- Time entry reminders for your team
- Report generation and distribution
- Data syncing between your time tracking and accounting software
Batch Similar Activities
Context-switching kills productivity. Instead of handling emails throughout the day, batch them into two or three dedicated blocks. Group similar non-billable tasks together to minimize the mental overhead of jumping between activities.
Set Clear Boundaries on Meetings
Meetings are notorious time sinks. Consider:
- Default to 25 or 50 minutes instead of 30 or 60
- Require agendas for all internal meetings
- Question whether each meeting needs to happen or could be an email
- Track meeting time to understand the true cost
Use Templates and Standardized Processes
Every time you recreate a document from scratch or reinvent a process, you're spending non-billable time unnecessarily. Build templates for common deliverables, standardize your workflows, and document your processes so the whole team can benefit.
Track Time in Real-Time
Reconstructing your timesheet at the end of the week is both inaccurate and time-consuming. Tracking time as you work—or using a running timer—captures hours more accurately and reduces the administrative burden of time entry itself. MinuteDock's timer sits right in your browser, so starting and stopping the clock takes less than a second.
Frequently Asked Questions
What percentage of my work hours should be billable?
This varies by role and industry, but most professional services firms target a utilization rate between 65-80%. According to SPI's benchmarks, 75% is considered the optimal threshold for profitability without burnout. Senior staff and partners often have lower targets due to business development and management responsibilities, while junior staff may have higher expectations.
Should I track time for fixed-fee projects?
Absolutely. Even when you're not billing by the hour, tracking time helps you understand true project profitability, price future work accurately, and identify scope creep. Many firms discover they're significantly underpricing certain services once they start tracking time on fixed-fee engagements.
What's the difference between utilization rate and realization rate?
Utilization rate measures the percentage of your available hours that you bill to clients. Realization rate measures the percentage of your billed value that actually gets invoiced (before write-offs and discounts). You need both metrics for a complete picture: high utilization with low realization still means lost revenue.
Is travel time billable?
It depends on your firm's policy and client agreements. Some firms bill travel at their full rate, others at a reduced rate, and some don't bill it at all. Whatever your approach, be consistent and communicate it clearly to clients upfront.
How do I handle time spent on multiple clients in one day?
This is where good time tracking habits become essential. The most accurate approach is to track time in real-time as you switch between clients, rather than trying to reconstruct your day later. Even brief interruptions or "quick" tasks should be captured—they add up faster than you'd expect.
What if my non-billable hours are too high?
First, analyse where that time is going. Is it necessary business activities like training and business development? Or is it inefficiency and administrative overhead that could be reduced? Focus on eliminating or automating low-value activities before cutting into time that genuinely benefits your business long-term.
Start Tracking Your Billable Hours with MinuteDock
Understanding the balance between billable and non-billable hours is the first step toward building a more profitable professional services practice. The next step? Actually tracking your time accurately and consistently.
MinuteDock makes time tracking for professional services simple and even (dare we say) enjoyable. Track billable hours by client and Project, monitor your team's utilization, and generate reports that show you exactly where your time is going.
Ready to see the full picture of how your firm spends its time?
