The same activity can be billable on one engagement and non-billable on another. A discovery call may be included in a fixed fee, charged hourly, or treated as sales work. The signed scope and billing terms decide the classification.
Do not discard non-billable time. Administration, proposals, rework, training, and internal coordination still consume capacity. Measuring them helps explain why an apparently strong hourly rate may produce a much lower effective rate.
Key points
What to know at a glance
| Topic | What to check |
|---|---|
| What are billable hours? | Work on agreed deliverables |
| What are non-billable hours? | Sales and proposal preparation |
| Classify ambiguous activities | Check the written scope first |
| Use both totals to improve pricing | Measure total delivery time |
What are billable hours?
Billable hours are time spent on activities the client agreed to pay for. Typical examples include producing deliverables, approved meetings, research, implementation, and revisions within the stated scope.
Classification should be decided by the engagement terms, not by a general assumption. Record the activity and result so a reviewer can see why the time belongs to the client.
- Work on agreed deliverables
- Approved client meetings
- Project-specific research
- Authorized revisions or support
What are non-billable hours?
Non-billable hours are work time not charged to a particular client. They often include marketing, accounting, professional development, general administration, and time spent fixing the business's own mistake.
Some non-billable work supports a client project indirectly. Track it to the project when useful, but mark it non-billable so it improves cost analysis without appearing on the invoice.
- Sales and proposal preparation
- General business administration
- Training not requested by a client
- Correction of avoidable internal errors
Classify ambiguous activities
Meetings, travel, communication, and revisions often create uncertainty. Resolve them in the proposal or contract by stating what is included, what is charged separately, and when approval is required.
When an unexpected activity arises, pause and discuss it before treating it as billable. Written approval protects the client from surprise and protects the business from performing unpaid extra work.
- Check the written scope first
- Apply the agreed billing policy
- Ask before exceeding included limits
- Document each approved exception
Use both totals to improve pricing
Divide project revenue by all delivery time, not only billed hours, to calculate an effective hourly rate. This shows whether coordination, revisions, or administration are reducing the value of the engagement.
Review patterns across similar projects. You may need clearer scope, a different rate, a separate fee for recurring work, or a more efficient process rather than simply trying to bill every internal activity.
- Measure total delivery time
- Calculate the effective hourly rate
- Identify repeated unpaid work
- Adjust scope, process, or price
Official sources
These references support the regulatory information in this guide. Check the current page before making a decision.
- U.S. SBA: Break-Even PointExplains how fixed and variable costs affect pricing, profitability, and the break-even point.
- U.S. Department of Labor: FLSA Reference GuideDefines hours worked for covered employees and summarizes wage-and-hour recordkeeping requirements.
Frequently asked questions
Questions about what are billable and non-billable hours?
Are client meetings always billable?
No. They are billable only when the agreement says they are chargeable or when the client approves the charge under an established policy.
Should non-billable hours appear on an invoice?
Usually not as a charge. A business may show an included item at zero cost when useful, but the presentation should be clear and agreed.
Why track time on fixed-price work?
Total time reveals the project's effective rate, estimate accuracy, and hidden delivery costs even when the client is not billed by the hour.