Measuring Efficiency: Why Billable Hours Arent Enough

billable hours accounting

Attorneys track billable time more than any other industry, and with good reason. Attorneys working in a law firm are required to work a minimum number of billable hours each year, with consequences such as termination a possibility if they don’t. Whether you provide consulting services or manage a firm of attorneys or CPAs, it’s important to track and invoice your billable hours and to make sure that your staff is doing the same.

This way, time tracking by task and billing accordingly would be easy. As a freelancer or small business owner, calculating billable hours can be a daunting task. It requires careful attention to detail and precision to avoid costly errors that could impact your income. But once again, you’re gonna go through the same process of coming up with that original flat fee price. We’re gonna now multiply it by three X and you’ll be enrolling people at your new better rate. We just tripled your rates in a very organic and step by step process.

Requirements for billable hours

Or I just wanna say that, uh, step number three is packaging your services. And, and this is really the essence that starting to move away from the billable hour or even a fixed fee is offering packages. As we mentioned on the highway, there’s gonna be those economy cars, the mid-size cars, and then the premium costs. And you can have three package offerings also, which is the, I call them silver, gold and diamond. Uh, and just to give you an idea when you’re starting do this, what you wanna do as far as a metric is they’re not thirds. Create professional looking invoices from your billable hours and rates with just a few clicks.

Finally, you need to create a detailed invoice to send to your client. Time Doctor then runs in the background tracking everything you work on. Make sure to keep track of the work you do on each project and client so you know how much to charge them correctly. Then, divide your annual expected earnings by the number of working hours per year. It’s usually 2080 hours for a full-time job, but you can adjust your working hours the way you want to. Your step-by-step guide to creating a resource management plan – for project managers that love delivering on time and on budget.

Why you should calculate billable hours

Picking off from recording the time spent on a project task, you can easily generate an invoice using accounting software. And that way you can focus on higher level work, you can focus on business development, or you might be able to just start taking Fridays off. I want you to have a firm that increases the quality of your life instead of takes from it. Because accounting professionals are customer service professionals. And sometimes they have clients that they wish would go away that don’t respect them, maybe treat them well, but treat their staff like an employee.

  • When in doubt, please consult your lawyer tax, or compliance professional for counsel.
  • The Project Management Institute dives deeper into both in this great time attendance management article.
  • This way, you’re tracking your task activity in real-time – ensuring that you don’t miss out on any billable time.
  • Additional features may include online timesheets, online invoicing, alerts, reports, analytics, and user management.
  • Uh, the other part is just not fluff or else your clients don’t even understand what it means.

Knowing how long it takes you to complete a project helps you set an hourly rate that allows you to make money and run a sustainable business. Administrators of law firms should track both realization rates and utilization rate of employees. In addition, there should be a monthly report that makes a comparison between the billable hours that are recorded, and fees billable hours accounting collected. In general, when lawyers have less than 100 percent of their billable hours, this could be an indicator of a problem. These issues could happen due errors in pricing systems, or due to duplicate work, and etc. If you’re going to be tracking billable hours, it helps to have a task management software or app that can organize your client to-do list.