Billable time creates the client charge; non-billable time explains the margin. Everhour keeps both visible by project and budget.
Track billable vs. non-billable time and see your real utilization rate and revenue potential in seconds.
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A billable vs non-billable calculation answers three practical questions: how many approved hours can be charged to the client, how many hours should remain internal, and what client amount those billable hours produce. It is not just a time total. The split affects invoices, project margin, staffing decisions, and whether a fixed-fee or retainer project is consuming more work than planned.
Use billable hours for work the client agreed to pay for under the engagement terms. Use non-billable hours for internal meetings, training, admin, rework not passed to the client, or tasks excluded by policy or contract. Keep the categories separate before you calculate dollars. Combining all worked time first makes utilization look cleaner than it is and can overstate what belongs on an invoice.
Start with each approved billable category: billable hours multiplied by its billing rate. Then add the billable amounts together. Non-billable hours do not increase the invoice amount, but they do increase total work time, so they belong in the project view. The basic formula is: billable amount = billable hours × billing rate.
For example, a client implementation includes 20 approved analysis hours at $160 per hour and 16 approved support hours at $100 per hour. The billable total is $4,800. If the same project also has 12 non-billable internal coordination hours, total work time is 48 hours. The project is 75% billable by hours, with 25% of the effort held outside the client charge.
A common mistake is treating every reduction as non-billable time. Non-billable work is time that should not be charged from the start. A write-down is different: the time was billable under the work type or agreement, but the final billed amount is reduced before invoicing. Keep those decisions separate or your records will hide whether the issue was staffing mix, scope control, or client discounting.
This distinction matters when you review utilization and realization. Utilization compares billable hours to total worked hours. Realization compares billed value to the value of billable work before write-downs. If you move write-downs into non-billable time, utilization falls for the wrong reason and realization looks better than it is. Keep billable status, approved hours, rates, and billing adjustments in separate fields.
A one-off calculation is enough when you need a quick client estimate, a project review, or a clean invoice subtotal from a short list of approved entries. It works when the hours are already reliable, the billing rate is known, and the tax treatment is handled separately. In the United States, there is no federal VAT/GST or national sales-tax rate for billed professional time; state and local rules control taxable services.
A managed workflow is the better answer when several people log time, clients have budgets, or approvals happen before invoicing. Everhour Project Budgeting supports hour-based and money-based budgets, recurring budget periods, threshold email alerts, and budget protection that can stop extra logging after a limit is exceeded. That turns the billable/non-billable split into an ongoing control instead of a month-end cleanup task.
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 approved work that the client agreed to pay for under the contract, statement of work, engagement letter, or project billing rules. Examples include delivery work, client-requested revisions, research, implementation, consulting, and support when those activities are included in the fee arrangement. Internal admin, training, sales work, and excluded tasks stay non-billable unless the agreement says otherwise.
Divide approved billable hours by total worked hours, then multiply by 100. If a project has 36 billable hours and 12 non-billable hours, total work time is 48 hours. The billable percentage is 75%, and the non-billable percentage is 25%. Use hours for this split, not invoice dollars, because rates can distort the time mix.
Non-billable time normally should not increase the invoice amount. Some teams show non-billable entries as zero-charge lines when the client expects visibility into total effort, but that is a presentation choice, not a revenue calculation. If the invoice only needs chargeable work, exclude non-billable tasks from the billable subtotal and keep them in internal project reports.
The United States has no federal VAT/GST or single national sales-tax rate for billed professional time. Tax treatment is state and local. Some services are not taxable, while some jurisdictions tax specific services or business receipts. Use a jurisdiction-specific tax input only when the service is taxable under the applicable state or local rule.
Non-billable time and discounts answer different questions. Non-billable time explains work that was never chargeable. A discount or write-down reduces the charge for work that was otherwise billable. Mixing them makes utilization, realization, and project margin reports unreliable because the record no longer shows whether the loss came from scope, pricing, or billing judgment.
Everhour Project Budgeting tracks hour-based and money-based budgets as time is logged, with recurring budget periods and email alerts at defined thresholds. Budget protection can stop timers and prevent additional logging after a budget is exceeded, giving admins a clear control point before extra billable or non-billable work expands the project.
Everhour reports can include Billable Time, Non-Billable Time, Billable Amount, and Cost columns, grouped by member, task, project, or client. That lets admins review the time split and money impact without rebuilding the calculation manually in a spreadsheet.
Track approved billable and non-billable work against live project budgets. Everhour connects logged time to budget alerts and protection rules, helping teams control scope before invoices are prepared.
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