Billable work needs clear rates, rounding, and approvals; Everhour keeps time entries connected to billing reports.
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Billable hours answer a direct question: how much approved client work should be priced for an invoice or revenue report. The core output is usually a pre-tax amount in USD: billable time multiplied by the agreed billable rate, with non-billable work excluded. For U.S. service work, do not add a federal VAT/GST because the United States does not have one.
The same time record can answer several related questions. A freelancer may need the client invoice amount. A firm owner may need billable utilization. A manager may need to know whether written-down time reduced revenue. Keep those answers separate: billable hours show chargeable time, while billed hours show what actually reached the invoice after edits, caps, discounts, or write-downs.
Use this formula for time-and-materials work: billable amount = billable hours x billable rate, calculated separately for each rate, then added together. If the agreement uses a billing increment, round each time entry according to that policy before totaling. Common increments include 0.1 hour, which equals 6 minutes, and 0.25 hour, which equals 15 minutes.
For example, a client reporting project includes 19 approved analyst hours at $165 per hour and 13 approved coordination hours at $90 per hour. The analyst amount is $3,135, the coordination amount is $1,170, and the pre-tax billable total is $4,305. If the team also spent 9 non-billable internal hours, total work time is 41 hours and the effective yield is $105 per total hour.
Billable hours are not the same as utilization, realization, collection, or effective billing rate. Utilization compares billable hours with total worked hours. Realization compares billed value with the value of captured billable time before write-downs. Collection compares cash collected with invoices issued. Effective billing rate divides revenue by a broader time base, often all worked time.
Those distinctions prevent a common mistake: treating a high billable-hours total as proof that the work was profitable. A project can have strong utilization and weak realization if the client receives a discount or the manager removes time before invoicing. It can also have strong realization and weak collection if the invoice remains unpaid. The calculation is the starting point, not the full financial result.
A one-off calculation is enough when you have a short job, one rate, approved hours, no tax line, and no later audit trail requirement. It is also enough for a quick estimate before sending a draft invoice. Once multiple people, rates, billing increments, write-downs, or client approvals enter the process, a spreadsheet total becomes fragile.
For recurring client work, use a managed workflow that captures time continuously, marks billable and non-billable entries, routes approvals, and hands invoice-ready totals to billing. Everhour supports project billing status, task-level non-billable controls, custom task rates, member-rate exceptions, and admin reports for billable time, non-billable time, billable amount, and cost.
This content is for general information only, may not be fully up to date, and is provided without any warranty or liability.
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Billable time is work time that the client agreement allows you to charge. It often includes client meetings, research, implementation, drafting, analysis, and project execution. It excludes internal administration, training, sales work, rework the client should not pay for, and any task marked non-billable by policy, contract, or manager approval.
Billing increments change the chargeable total by rounding time entries before the final amount is calculated. With 0.1-hour billing, a 7-minute entry usually rounds according to the written policy tied to 6-minute units. With 0.25-hour billing, the same entry may become 15 minutes. Apply the increment consistently to each entry, not only to the daily total.
Billable hours are approved chargeable time before final invoice decisions. Invoiced hours are the hours actually placed on the client invoice. The two differ when a manager writes down time, removes a task, applies a fixed-fee cap, excludes a non-billable item, or delays some approved work until a later billing period.
No. The United States has no federal VAT/GST and no single national sales-tax rate for billed professional time. Tax treatment is state and local, and services may be taxable or not taxable depending on the jurisdiction and service type. Use a jurisdiction-specific tax input only when the service is taxable.
Payment terms matter after the billable total becomes an invoice amount. For federal-agency vendor invoices, Prompt Payment rules generally use the contract date, accepted discount terms, an accelerated-payment rule, or 30 calendar days after receipt of a proper invoice. Private client payment timing comes from the contract, engagement letter, or invoice terms.
Everhour lets admins set project billing status, mark specific tasks non-billable inside billable projects, apply custom task rates, and use member-rate exceptions. Reports can show billable time, non-billable time, billable amount, and cost, so the invoice total and the work behind it stay visible.
Track approved billable and non-billable work with project billing settings, task exceptions, and rate-based reports so Everhour keeps invoice totals tied to actual work.
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