If you’re a freelancer, agency, or professional services team, your finances usually come down to one question:
How many hours can you actually bill—and what’s eating the rest?
Billable time drives revenue. Non-billable time drives everything else: sales, admin, learning, operations, and quality. The goal isn’t “100% billable.” The goal is clarity + control—so you price correctly, protect margins, and avoid burnout.
This guide covers:
What billable vs non-billable really means
A clean way to classify hours (without overthinking)
Utilization rate (formula + targets + caveats)
How to reduce “invisible” non-billable time
Practical setups for freelancers and teams
1) Definitions that actually matter
Billable hours
Billable hours are time spent on client work that can be charged under an agreement (hourly, retainer, or a fixed-scope contract where time still needs tracking).
Non-billable hours
Non-billable hours are time spent on tasks that support the business but aren’t directly chargeable to a specific client (admin, internal meetings, training, marketing, tooling, etc.).
Key point: A task can be “client-related” and still non-billable if your contract doesn’t allow charging for it (e.g., unlimited calls, unlimited revisions, “quick questions”).
2) Quick examples (so you don’t misclassify)
Delivering client project work — usually billable ✅
Core delivery/output.Client calls / meetings — billable or depends ✅/⚠️
Billable if your contract allows charging for meetings.Email/Slack with client — billable or depends ✅/⚠️
Often becomes “invisible time” unless you track it and your terms cover it.Proposals & sales calls — usually non-billable ❌
Business development overhead.Invoicing, bookkeeping — usually non-billable ❌
Admin work that supports the business.Internal planning, team sync — non-billable or depends ❌/⚠️
Only billable if it’s explicitly included/contracted (rare).Training, learning — usually non-billable ❌
Valuable investment, but typically not invoiceable.Fixing your own tooling/stack — usually non-billable ❌
Operational overhead.
Tools and time-tracking guides consistently describe billable as client-chargeable work and non-billable as overhead/admin/internal tasks.
3) The “classification rule” you can use every day
When you’re logging time, ask one question:
“Could I put this line item on an invoice and the client would reasonably accept it under our agreement?”
Yes → billable
No → non-billable
Maybe → it’s a contract/policy problem (fix your scope + billing rules)
A simple decision tree
Is the task in the scope (SOW/contract)?
Is it for that client (not internal improvement)?
Is it allowed to be billed (hourly/retainer terms)?
If you hit “no” anywhere → non-billable.
4) Utilization rate (the metric people misread)
Utilization rate formula
The most common definition is:
Utilization rate = (Billable hours ÷ Available/Worked hours) × 100
Where “available hours” is typically your working capacity for the period (e.g., 40 hours/week minus PTO/holidays).
What’s a “good” utilization rate?
Benchmarks vary by role and industry, but many professional services firms treat ~70–80% as a healthy target range (profitable without pushing people into constant overtime).
Important caveat: Senior roles usually have lower utilization because leadership, sales, and management are non-billable-heavy.
5) The 3 numbers you should track (not 20)
1) Billable hours
Your revenue engine.
2) Non-billable hours (by bucket)
Track these buckets at minimum:
Admin
Sales/marketing
Operations
Learning/quality
3) Effective hourly rate (EHR)
Even if you charge fixed-price, EHR reveals the truth.
EHR = Revenue ÷ Total hours worked (billable + non-billable)
If your EHR is too low, you don’t need motivation—you need:
better pricing
tighter scope
fewer meetings
less context switching
better filtering of clients
6) Why non-billable time isn’t the enemy (but unmanaged non-billable is)
Some non-billable is essential:
marketing keeps the pipeline alive
training keeps skills sharp
systems keep delivery efficient
admin keeps cashflow clean
The issue is when non-billable becomes:
invisible (you don’t track it)
unbounded (no limits)
unpaid client support disguised as “quick messages”
7) How to increase profitability without “working more”
A) Convert the right non-billable to billable (with better contracts)
Common fixes:
Define meeting limits (e.g., “1 weekly call included; extra billed”)
Define revision rounds (e.g., “2 rounds included”)
Add a support retainer for ongoing help
Bill project management explicitly for complex projects
B) Reduce low-value non-billable
Big wins:
templates for proposals and onboarding
canned replies for common questions
batch email/Slack responses
timeboxing “admin hour”
fewer tools, fewer contexts
C) Protect deep work (this increases billable output)
block focus time
group meetings into 1–2 days
set response windows (“I reply at 12:00 and 17:00”)
8) Recommended tracking setup (freelancers)
Use this structure:
Client → Project → Task → Billable flag
Minimum tags:
billable
non-billable-admin
non-billable-sales
non-billable-ops
non-billable-learning
Weekly review (15 minutes)
What % was billable? (utilization)
What non-billable bucket grew the most?
Which client generated the most “hidden support”?
What changes prevent that next week? (scope, pricing, limits)
9) Team setup (agencies / professional services)
Add two more layers:
Role-based targets (don’t force everyone to hit the same utilization)
Project profitability view (planned vs actual hours)
Best practice: Track planned hours for a project (your internal budget) and compare weekly against tracked actuals. That’s how you catch scope creep early—before it becomes free work.
10) How Asrify helps (simple and practical)
With Asrify, you can:
Track time per client/project/task
Mark entries as billable vs non-billable
Tag non-billable by bucket (admin/sales/ops/learning)
Pull reports for utilization and project profitability
Keep the time entry connected to real work context (tasks + notes), so invoicing and client updates are faster
If your tracking tool is disconnected from your tasks/projects, people stop using it. The “all-in-one” workflow is what makes it stick.
