Billable vs non-billable hours: where to draw the line

Definitions with agency examples

To compare chargeable work with a defined working calendar, use the utilization calculation. It requires available hours as well as time records.

Billable time is work your agreement permits you to charge to the client. Non-billable time is work you record but do not charge as a separate client item. The activity name alone does not decide the category: a workshop could be a paid deliverable, an included part of a fixed fee or a sales conversation before an engagement exists. Start with the commercial arrangement.

Examples include an authorized hourly design task, an internal team meeting and a correction of an agency error. Record the activity accurately before deciding how it affects the invoice. Fixed-fee work can consume time without creating a separate hourly charge. The time-to-invoice guide explains the later handoff; this page addresses the eligibility decision that comes first.

The grey areas: meetings, revisions, onboarding

Meetings, revisions and onboarding often sit at the boundary. A client planning call might be included in a retainer, while an extra workshop needs separate acceptance. A revision may be within the agreed allowance or correct a mistake the agency should absorb. Onboarding can be a separately priced service or an agency cost built into the engagement. There is no useful universal rule that all meetings are billable.

Create a short decision table for your own services: activity, included allowance, trigger for an extra and evidence of approval. When an unfamiliar case appears, ask the engagement owner before putting it on the invoice. The retainer scope checklist helps define included work, and the dispute guide explains what happens if the boundary was left unclear.

Write the rule into the engagement

State which work is included, which work is charged hourly and which extras require approval. Give the team the same version of the agreement that finance will use. A rate alone is not enough if the client believes every routine meeting is included in the base fee. Document how changes reach the person reviewing time, rather than relying on private conversations between sales and the client.

ABH ties time records to clients, projects and tasks and supports single and bulk approval. This guide does not claim an automatic billable classification or billable flag setting in ABH. Use an explicit manual review against the agreement, and keep excluded work out of the billing selection. The timesheet approval checklist supports that review without replacing client authorization.

Track non-billable time on purpose

Track internal work because it consumes the team's available time even when no invoice line follows. Record enough context to distinguish training, sales, administration, internal improvements and agency corrections. Keep categories few enough that people can use them consistently. Do not force someone to charge a client simply because the time-tracking process has no agreed place for internal work; resolve that process gap with the team.

Review non-billable entries as evidence of workload rather than as a personal failure score. Several hours spent repairing a reusable template may reduce future effort, while repeated rework may point to an unclear brief. These are different management decisions. The team time-tracking guide shows how to explain that purpose so people do not hide necessary work to make a ratio look better.

Price recurring non-billable work into your rate

Recurring internal costs must be funded somewhere in the business model. Estimate delivery time alongside sales, administration, leave and other overhead when considering a rate. Do not quietly add internal hours to a client's invoice to recover them after the fee has been agreed. Use a prospective pricing decision, and distinguish a planning calculation from an entitlement to charge an existing client.

Illustrative fictional example, USD, excluding taxes: a monthly revenue target of $12,000 spread over 120 chargeable hours implies $100 per chargeable hour before checking other costs and commercial factors. Dividing by 160 total working hours would suggest $75 and ignore the funding gap. These are planning assumptions, not benchmarks. The agency service pricing guide develops the wider fee decision.

Review the split each month

Compare the agreed categories each month and investigate changes in context. A rise in internal time may reflect onboarding a colleague, a deliberate investment or repeated scope confusion. Look at the work before drawing conclusions about individuals. Record one specific action, such as changing a briefing template or renegotiating a service boundary, and check whether it addressed the cause in the next period.

ABH provides client, project and team analytics with CSV and PDF exports; advanced analytics is Pro. Its existing realization rate view is not a utilization or margin output. Do not label it as one. Use the time tracking and invoicing overview for the product workflow and rounding guidance for the separate decision about translating eligible duration into a charge.