What Counts as Billable Hours for Accountants?
Understand how accountants differentiate between chargeable and non-chargeable time. Learn to accurately track and communicate billable hours for clear client agreements.
Billable hours are a fundamental concept in accounting and other professional service industries. They represent time spent on tasks directly chargeable to a client, forming the basis for invoicing in a time-based billing structure. This system provides a transparent framework for both service providers and clients.
Understanding Billable Activities
Billable activities encompass tasks directly contributing to a client’s specific project or objective. This includes direct client work, such as drafting financial statements, preparing tax returns, or conducting audits.
Client meetings and communications are also considered billable. This covers in-person discussions, virtual calls, phone conversations, and emails directly related to the client’s project. The time spent interacting with clients to understand their needs, provide updates, or answer questions falls into this category.
Project-specific research and analysis are billable when directly performed for a client’s needs. This might involve researching specific tax laws or accounting standards relevant to a client’s unique situation. Similarly, travel time directly for client-related purposes, such as visiting a client’s office for on-site work or meetings, can be billed if previously agreed upon.
Revisions and edits requested by the client on completed work are billable, as they represent additional work performed to meet client specifications.
Understanding Non-Billable Activities
Non-billable activities are those that support the operations of an accounting firm but cannot be directly charged to a client. These tasks are generally absorbed by the firm as overhead. Administrative duties, such as general office organization, internal paperwork not tied to a specific client project, or managing internal systems, fall under this category.
Business development and marketing efforts are also typically non-billable. This includes time spent writing proposals for potential new clients, networking events, or general marketing campaigns to attract new business. These activities are essential for firm growth but do not directly generate revenue from existing client engagements.
Internal meetings and training are commonly categorized as non-billable hours. This covers staff meetings, professional development courses, or internal team discussions not directly related to a specific client project. Personal time, such as breaks, lunch, or personal errands, is never billable.
General professional development, like reading industry news or attending non-client specific webinars, also constitutes non-billable time. Time spent correcting one’s own errors or inefficiencies is considered non-billable, as clients should not be charged for internal mistakes.
Establishing Billing Clarity
Establishing clear billing practices begins with a comprehensive client agreement or engagement letter. This document should outline the scope of services, billing rates, and what activities are considered billable or non-billable. It also details payment terms, client responsibilities, and any policies regarding expenses or travel time.
Accurate and contemporaneous time tracking is important for billable hours. Using time tracking software or detailed logs helps ensure all work performed for a client is accurately recorded as it happens. This supports the generation of transparent and justifiable invoices.
Effective communication with clients about potential changes in project scope and their impact on billable hours is also important. If a project expands beyond the initial agreement, discussing these changes upfront helps manage client expectations and avoids billing surprises. This proactive approach maintains trust and clarity throughout the engagement.
Providing detailed invoices that itemize billable activities reinforces transparency and builds client confidence. These invoices should clearly describe the services provided, hours worked, and associated rates, allowing clients to understand exactly what they are paying for. This level of detail helps prevent disputes and facilitates timely payments.