Billable totals start with approved time, rounded increments, and rates. Everhour keeps those rate rules tied to tracked work.
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The calculation answers how much approved client work is worth before invoice-specific taxes, discounts, payment fees, or late-payment charges. Start with billable time, not total work time. Internal meetings, admin cleanup, sales calls, and non-billable support can belong in profitability reports, but they do not belong in the client-facing billable-hours total unless the client agreement says they are chargeable.
For U.S. work, the base amount is normally denominated in U.S. dollars. The United States has no federal VAT/GST and no single national sales-tax rate for billed professional time. If the service is taxable, the tax input must come from the state and local jurisdiction, such as a gross receipts tax, general excise tax, or sales tax rule that applies to that service.
The basic formula is billable amount = approved billable hours x billable rate. If more than one rate applies, calculate each rate group separately, then add the subtotals. Do not average rates before multiplying unless the client agreement truly uses a blended rate. Rounding belongs before pricing when your engagement bills in increments such as 0.1 hour or 15 minutes.
For example, a data migration project includes 34 approved specialist hours at $180 per hour and 19 approved analyst hours at $120 per hour. The specialist subtotal is $6,120, and the analyst subtotal is $2,280. The pre-tax billable amount is $8,400. If the team also spent 7 non-billable internal hours, total work time is 60 hours and the effective billing rate across all work is $140 per hour.
Billable hours measure time that can be charged to the client. Billed hours are the hours actually placed on the invoice after write-downs, caps, courtesy adjustments, or partner review. Utilization compares billable time with total working capacity. Realization compares billed value with standard billable value. Collection compares paid invoices with issued invoices. Effective billing rate spreads revenue across a chosen hour base.
These distinctions prevent a common mistake: treating a clean billable-hours total as proof of profitability. A project can have high utilization and low realization if approved hours are written down. It can have strong realization and weak collection if the client pays late or partially. For U.S. federal-agency vendor invoices, Prompt Payment rules generally use a 30-calendar-day due date after a proper invoice unless another listed term applies.
A one-off calculation is enough when you have approved hours, one or two known rates, a clear rounding rule, and no dispute over which entries are billable. It is also enough for checking a draft invoice before adding jurisdiction-specific tax, discount, expense, or payment-term details. The result gives you a fast pre-tax value, not a complete billing record.
A managed workflow becomes necessary when several people enter time, rates vary by person or task, write-downs require approval, or invoices must tie back to source entries. Everhour supports per-person defaults, per-project rate overrides, dated rate history, and project, member, or custom task rates, so rate rules stay connected to tracked work instead of living only in a spreadsheet.
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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Multiply approved billable hours by the applicable billable rate, then add each rate group together. If a project has one rate, the calculation is direct. If it has several roles, tasks, or dated rate periods, calculate each group separately. Add tax, discounts, expenses, or late-payment charges only after the base billable amount is correct.
Rounding happens before the hour is multiplied by the rate when the client agreement uses billing increments. A 0.1-hour increment rounds time into 6-minute blocks, while a 15-minute increment rounds into quarter hours. Apply the same rule consistently to each time entry or approved total, depending on the agreement, so the invoice matches the written billing method.
Billable hours are approved time entries eligible to be charged. Billed hours are the hours actually included on the invoice. The two differ when a manager writes down time, excludes a task, applies a fixed-fee cap, or holds an entry for a later invoice. Use billable hours for raw value and billed hours for final invoice value.
Non-billable work should not be included in the client-facing billable amount unless the contract or policy makes that work chargeable. Keep it in internal reports because it changes utilization, profit margin, and effective billing rate. Mixing billable and non-billable hours inside the invoice formula overstates the amount due.
No. The formula for the pre-tax billable amount stays the same. U.S. tax treatment is state and local, not a federal VAT/GST system or a single national rate. If the service is taxable in the relevant jurisdiction, apply the correct jurisdiction-specific tax input after calculating the billable subtotal.
Everhour separates cost and billable rates, supports per-person defaults and per-project overrides, and preserves dated rate history. Billable work can be priced by project, member, or custom task rate, which keeps role-based and project-specific pricing aligned with the time entries behind the invoice.
Everhour Billing & Invoicing converts tracked billable time and expenses into invoices, calculates amounts from rates while excluding non-billable work, and marks invoiced time so it does not appear again in future invoices. Invoices can be exported to QuickBooks Online, Xero, or FreshBooks.
Set project, member, or task rates once, keep dated changes attached to the work, and move approved billable time into invoices with Everhour for cleaner client billing.
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