Billable Hours… let’s dive in!
When you're a freelancer, it's tempting to focus on the income you earn from clients. But if you want to be successful long-term, you also need to track how many billable hours you work each week, month, and year. If you’re not already tracking your time and billing clients based on those hours, here's why it's important:
What are billable hours?
Billable hours are the hours you charge clients for. They are the hours you spend working for clients on projects, and they’re also the hours that you spend managing your business and building your brand.
All of these things can be billable — so do what you love!
How do hourly rates work?
Hourly rates are based on a fixed number of hours per week or month, and they're usually calculated by dividing the total amount of money you want to make in a year by your desired salary. For example, if you're looking for $100,000 this year and assume that you'll work 40 hours per week on average during that time frame, then you should divide 100k by 40 (or 2,500), meaning your hourly rate should be approximately $250. That's not all though—you may also have to consider additional factors like whether or not there will be any overhead costs associated with working for your chosen company (such as health benefits).
Why billable hours matter for your business
Whether you're a freelancer or an employee, it's important to know how many hours you work in a day. Billable hours are the rate at which you charge your clients based on the time spent on their projects and they can be used to track your productivity, plan for the future, and budget effectively.
Let's say that you're a freelance writer who charges $100 per hour and has a fixed monthly salary of $3,000. You have two different clients who need content written for their web pages but not until next month. Instead of waiting until then, why not create a budget that works for both projects? You can dedicate 6 hours each week (3 full days) towards earning that $3k by writing articles for one website while spending 10 hrs working on another site. This will give me enough time to earn approximately $1k during this period without having to worry about bills piling up in my inbox right now!
What are the benefits of billable hours?
Billable hours are great for a number of reasons. They allow you to track how much time you're spending on different projects with specific clients, as well as allowing you to see how much time you're spending on various tasks. For example, if your client is paying for X amount of work, but it's taking 5x longer than expected due to unforeseen problems or issues with the design process (or anything else), billable hours will help keep everything fair and balanced.
How to calculate your billable hours (and determine your rates)
- Calculate your billable hours.
- Determine your rates.
- Calculate your hourly rate: Divide your total annual salary by the number of weeks in a year (52).
- Calculate the hourly rate per project: Multiply the number of hours spent on a project by your hourly rate and divide by the total number of hours spent on that particular project. For example, if you were working for two months on a single big project, you would multiply 200 billable hours by $100 an hour to get $20,000, then divide that result ($20k) by 300 total billable hours (200 + 100) to get an average daily pay rate of $66.67/hr as compared to your normal day rate of $100/hr or more! This is useful information because it can help convince clients they're getting good value while also allowing them to offer discounts when necessary!
Want to learn more about managing your time and increasing productivity, so you can earn more from those precious billable hours?
If you’re already a time-management expert, this section is for you.
But if not, you might find it helpful to review the basics before diving into the more advanced topics in this article.
Billable hours are the hours you charge clients, whether they're paid hourly or at a flat rate. Tracking and managing billable hours is important for project budgeting and long-term planning
Billable hours are the hours you charge clients, whether they're paid hourly or at a flat rate. Tracking and managing billable hours is important for project budgeting and long-term planning, but it's also a good practice to keep yourself accountable for your time. When you’re tracking your time, it’s easy to see if you're spending too much time on things that aren't paying the bills (like email).
Recording your billable hours gives you an accurate picture of how much revenue is coming in each month. This can help you make predictions about future revenue so that if prices go up or down, you can adjust accordingly. It also gives employees more visibility into what they need to be doing on a daily basis in order to meet their goals.
Is it better to bill by the hour or by the project?
You can bill your client by the hour or you can bill them at a flat rate. Both methods have their pros and cons, so you should know when to use each one.
Billing by the Hour
If you bill by the hour, your rate is usually determined by how many hours are involved in a project or task. In this case, it's important to have an accurate time estimate before starting any work on a project so you don't end up overcharging your clients! If a client needs something done within two hours but takes three hours instead of two because they didn't give enough details about what they want to be done exactly (or because there were some unforeseen challenges), that's where billing-by-project comes in handy because then we wouldn't be able to charge for those extra minutes spent figuring out how best meet our client's needs under uncertain circumstances like these ones above!
Billing at a Flat Rate
One of the main advantages of charging a flat rate is that it's easier to budget for your projects. When you know exactly how much you're going to be paid for a project upfront, it's easier to plan and manage your finances accordingly. This can be especially helpful if you have irregular income from month-to-month.
Another benefit of billing at a flat rate is that it often results in higher quality work from contractors since they aren't incentivized by an hourly wage.
How to bill hourly as a consultant?
The first step is to determine your hourly rate. This can be done in one of two ways: either by asking for a quote from your clients or by asking other consultants in your industry what they charge per hour. If you want to get an idea of how much other consultants are charging for their services, check out this article on pricing.
Once you have determined how much time it takes for you to do the work for a client's project and how much money it should cost them, multiply that number by your hourly rate to arrive at how much money each task will earn you (your billable hours). Now that you know how many billable hours each project should take, go ahead and start billing as usual!
How can Freelancers Ensure They are Earning their Worth
As a freelancer, you are in control of your own destiny. You can work as little or as much as you want and make whatever schedule works for you. But Not only will tracking your time help ensure accurate billing, but also provide valuable insights into how long certain tasks actually take so that with this freedom comes great responsibility - namely, the need to efficiently manage your budget and billable hours. Here are some tips on how to do just that:
Know Your Worth
The first step is understanding what your time is worth. This will vary depending on factors such as experience, skill set, industry, etc., but it's important to have a general idea of what an hour of your time should cost. Once you know this rate, stick to it when billing clients. Don't be afraid to negotiate if necessary - after all, they're hiring YOU because they value YOUR expertise!
Track Your Time
Once you start working with clients, it's crucial that you keep track of every single minute spent on their project (even if it's just responding to an email). There are plenty of tools out there designed specifically for this purpose - find one that works for you and use it religiously.
There are a few main difficulties that freelancers run into when billing their clients. First, many freelancers work on an hourly basis and have to keep track of their time in order to bill accurately. This can be difficult if you're working on multiple projects at once or if your work is interrupted frequently.
Second, some clients may not be willing to pay for all the hours you've worked, so you need to be able to negotiate rates and payment terms upfront. Finally, it can be tricky getting paid promptly by some clients, so it's important to have a system in place for tracking invoices and payments.
Overall, billing can be a challenge for freelancers, but it's important to remember that these challenges are part of running your own business. By being organized and proactive, you can make the billing process much easier for yourself.
How can managers approach budget operations for freelancers?
As a manager, it's important to be clear about your budget operations when working with freelancers. Here are some tips to help you manage your finances and keep track of expenses:
- Get organized from the start. Make sure you have a system in place for tracking invoices and payments. This will save you time and hassle down the road.
- Communicate clearly with your freelancers about payment terms and expectations upfront. That way, there are no surprises later on down the line.
- 3 Keep tabs on what's being spent where, so you can stay within budget while still getting the work that needs to be done
- Try using tools like Harvest or FreshBooks to help with invoice management and expense tracking
- If possible, automate payments whenever possible
- Set up reminders for yourself (and your team) about upcoming deadlines or milestones related to payments
- Have an emergency fund set aside in case any unexpected costs come up
- Be prepared to negotiate if necessary - but know your bottom line
- Don't forget about taxes! When paying freelancers, make sure to withhold appropriate amounts for tax purposes
- Keep good records throughout the process so you can refer back as needed.
By following these tips, you can manage your budget operations when working with freelancers effectively and efficiently.
Tips for tracking billable hours
- Use a time tracker. There are many time tracking apps available online, but the simplest solution is to use the timer on your phone or computer.
- Use a tool that allows you to track billable hours in real time. Many tools allow you to track how much time you spend on each task and then calculate how much of your day was billable based on an hourly rate, so this method can help ensure that you're billing for everything that could be billed.
- Use a tool that allows tracking of billable hours in a spreadsheet. While this method doesn't include any automation features like those mentioned above, it does allow flexibility in how often you log your work hours and how detailed those logs can be (like whether they include information about breaks).
Why should you use a time tracker?
If you're looking to start a business, or just want to work for yourself, it's important to understand what it takes. First of all: time management. Time tracking is not about watching the clock; it's about planning ahead and keeping track of your progress. That way, when the end of the week comes around and you have a huge stack of invoices from clients who expect payment in full by Friday afternoon—and if you don't get those invoices out fast enough, then those clients might not be able to pay their rent or buy groceries this month—you'll know exactly how much money you've earned on average per hour.
Time tracking helps keep track of things like expenses as well as income. When your client pays $500 (or whatever) for an hour spent working together on various projects related directly to his/her own needs/wants/objectives while also accounting for any special circumstances such as travel time spent outside office space during business hours due to needful cases where distance was required between meeting locations."
Time tracking with screenshots allows you to ensure an accurate and precise account of billable hours
Time tracking with screenshots allows you to ensure an accurate and precise account of billable hours. If your employer doesn't provide a time-tracking tool, track your time in a spreadsheet or Google Docs.
Tracking your billable hours is tough. But it's worth it!
Tracking your billable hours is tough. But it's worth it!
You might be thinking, "how do I even begin to track my billable hours? I'm not organized." Or perhaps you're thinking, "I don't have the discipline to keep up with all of this," or maybe even "this is too much work!"
But you can do this! It just takes a little bit of persistence and a lot of faith in yourself. The most important thing is that you don't give up—and if that means putting some money on the line or promising yourself something special in exchange for reaching certain goals, then so be it! The point is: if your tracking system isn't working out for you at first, try again until it works. You'll get there eventually—and when you do finally hit upon the right method for keeping track of how many hours you're putting in each day and week, trust me when I say: it will feel amazing!
BeforeSunset can help you out!
As you can see, there are a lot of different ways to track your billable hours. The best solution is not necessarily the most complicated one, but rather the one that works best for you and your business. Check out BeforeSunset’s budget solutions for freelancers and managers now.