According to DocuSign, Companies, on average, spend as much as 16 days a year looking for paper documents. Also, at least 23 hours per week senior managers spend in meetings.
This proves that non-billable hours are a necessary evil. If you know time is money, you will try to minimize those hours as much as possible while still being sure the work you do is still up to standards. So, how to reduce such non-billable time? We will learn in detail.
What are non-billable hours?
First, let’s clarify what non-billable tasks are in general. Common examples of non-billable time include:
- Prospecting, marketing, and other activities related to business development
- Invoicing, processing payments, and other administrative tasks
- Employee recruiting and training
- Internal marketing
- Proposal writing
- Client communication
- Pitching to new clients
- Taking training courses to improve your skills
- Networking and Conference appearances
- Any work that is beyond the scope of the project
Thus, we can see that non-billable hours aren’t directly connected to the projects, and as such can’t be billed. On the other hand, billable hours can be directly invoiced and billed to the client.
All the abovementioned tasks take up a huge part of your time, which makes them an expense to the business. If you haven’t optimized them well, they can cost you more than you expect. That’s why tracking non-billable hours is crucial to keep your business efficient.
Another question arises – How can you use your time as efficiently as possible, spending as much of it on billable and not non-billable hours? Before answering that, we will observe why tracking non-billable hours is important.
Why track non-billable hours?
Knowing the percentage of billable time within the total hours is crucial in the process of reducing the number of non-billable hours. This percentage, also known as the utilization rate, directly affects the result.
To improve the utilization rate, the company must focus on tracking billable as well as non-billable hours accurately. Each wrong measure will reduce the total billable hours and create mistakes in assessing the billing rate.
Here are just some of the reasons to track non-billable hours:
- Determining fees: Some clients can cost your business more if you spend more non-billable hours on them. Identifying the clients that make your employees have more non-billable hours can solve the issue proactively. One of the solutions can be adjusting the prices for future projects, as well as any other solution that will increase your profitability and billable hours on the project.
- Development and new knowledge: Expanding knowledge and obtaining new skills are very important for the professional development of the employees. Tracking the non-billable hours shows exactly how much time the company dedicates to the employees’ development.
- Deciding whether you’ll accept the project or not: Analyzing the ratio of billable and non-billable hours – that is, how much time your employees spend on a project – will let you know whether the project is profitable.
- Time evaluation: Tracking non-billable time will show that it is equally important as the time spent on billable work. Tracking non-billable hours can give you a more precise impression of the real value of your time, and let you know how to get more quality from it.
5 tips to reduce non-billable hours
1. Identify what is a non-billable task and what’s not and set rules on billable activities
The most important issue, now that you know the difference between billable and non-billable hours, is determining activities that represent non-billable tasks for you.
It is important to understand there is no universal answer to this question, and that you’ll have to determine what’s billable on your own. Investigate how your competitors charge and think about what your clients will tolerate, as well as what is ethical and correct to invoice.
Above all, make sure that your client is aware of all expenses, so they aren’t surprised when they get an invoice with unexpected expenses.
2. Automate repetitive work
According to a study, almost 70% of employees believe 40% of their time is spent performing routine tasks. You can imagine the effect on company profitability if that 40% were to be spent on more significant work. Automating these tasks by implementing new technologies would make efficiency and productivity reach their maximum.
Hence, the reason for automation is to delegate repetitive menial tasks, so the employees can dedicate their time to the tasks that will be counted as billable. The automation itself can reduce administrative task time by 10+ hours a month.
You will face a problem if your employees resist learning something new. Old and manual processes seem easier to them while relying on technology to simplify basic processes can create frustration and a feeling of wasting time and effort on the change.
Only when you create a collective understanding of the importance of losing a great amount of time when using manual labor, the company can become more cost-effective and successful.
An example of automation is using time tracking software, explained below.
3. Use automatic time tracking software
Tracking time wrong and project overrun reduce total billable hours. Tracking tasks such as administrative manually can significantly impact your workflow and profitability.
The best way to determine the number of hours spent on each task is using time tracking software. The data you will receive will help you identify exactly what takes your employees’ time. You will be able to find ways for them to manage their time efficiently.
Using time tracking tools like Time Analytics offers real-time tracking, which enables all work hours to be recorded accurately. If you still haven’t implemented a system like this one, mistakes are bound to happen. The result of not using an automated system can lead to a timesheet not reflecting accurate time spent on the project, which can result in a lower number of billable hours.
Reports these software solutions deliver can significantly simplify decisions like redistributing tasks to the employees to more efficiently in completing them.
4. Outsource the non-billable tasks
If a high number of non-billable hours affects your productivity, the best option may be to outsource certain activities.
If you redirect these tasks to the people specialized for them, and there are a lot of them on the market, starting with freelancers, there will be a lot more time for billable tasks. In a lot of areas, outsourcing services might prove worthwhile.
Hence, it is important to understand all the possibilities and advantages and use them in the best possible way.
5. Use the phone on special occasions
Many jobs require employees to not be in front of their computers at all times. Occasional field work won’t allow you to automatically log your tasks in the program. This can lead to wrong time logging or forgetting to make the logs.
To avoid untimely data, the best solution is to use a time tracking software solution that also has a mobile version.
Once you understand that texting and calls, meetings, and other non-computer-related activities represent spent time that needs to be accounted for in the work hours logs, you will have a realistic perception of your time and accurate reports.
Thus, it is important to log each task’s details on your mobile phone as well.
Non-billable hours are inevitable for any company to succeed. Those hours include important administration, business development, as well as employee training and development. In other words, you will never be able to completely eliminate non-billable work. However, it is important to reduce it as much as possible to make sure you’re making more profit and you’re being adequately paid for your work.
Using the tips we have mentioned above will enable you to bill your clients accurately and receive adequate compensation.
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