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How Do You Invoice Billable Hours?

Feb 1, 2023 6 min
How do you invoice billable hours

How Do You Invoice Billable Hours?

Reading Time: 6 minutes

To invoice billable hours, you should keep accurate track of the time spent doing a client’s work.

As a freelancer or small business owner, calculating billable hours can be a daunting task. It requires careful attention to detail and precision to avoid costly errors that could impact your income.

Whether you are a freelance legal adviser, copywriter, or graphic designer, it’s vital to understand accurate invoicing for your services to maintain a cash-positive business.

This article will touch on the following:

Click on any of the underlined texts above to jump to that section.

What is invoicing?

It is the process of sending a payment request document to your customer or client for the goods or services provided.

For example, a freelance photographer would send an invoice to request payment from a client for capturing family photos.

Creating an invoice on accounting software

Typically, the invoice would include details such as the date, document number, customer’s address, a description of the delivered service, the quantity of service, and price.

The photographer specifies a payment window, such as 30 days, for which the customer should pay the invoiced amount.

Invoicing helps businesses keep track of financial transactions and ensure steady cash flow for goods or services.

What should be included on an invoice?

When sending an invoice, you should generally include the following information:

  1. A unique invoice number for easy tracking of your invoices.
  2. Issuing date of the invoice
  3. The buyer’s and seller’s names, contact information, addresses, phone number, and email address.
  4. Itemized goods or services with a detailed description, such as item numbers, sizes, or colors.
  5. The unit price and quantity of each item
  6. State the total amount due, including any applicable taxes or discounts.
  7. Payment terms that specify the due date and method of payment.
  8. Any additional information, such as notes, instructions, discounts, and shipping or handling charges.

Having your company’s logo or any branding elements on the invoice is also suitable for being professional and making your business stand out.

What are billable hours?

This is a time-based payment agreement between a service provider and a client.

The client pays a fixed amount for every hour spent working on the project.

For example, a graphic designer would bill for activities such as thinking up ideas for a logo, brainstorming with a client, and revising designs.

Check out: What Are Billable Hours? Setting Your Billable Rates

How to calculate billable hours

To calculate billable hours or Time tracking, ensure you are on the same page with your client regarding the billing rate.

Confirming the billing rate by signing an SLA or contract before kicking off the project would be best.

You could calculate billable hours with accounting software, time-tracking software, or Excel. We’ll focus on Accounting Software and Excel.

Using Accounting software to calculate billable hours

Time tracking with accounting software provides a comprehensive solution for a small business as it combines bookkeeping with project management features.

Let’s get into the step-by-step guide:

Create a new project

Enter the details of your client’s project and define the start/end dates.

Add a new project to be billed

Define the billing type

Assuming the project has different tasks, it would be best to work with Task hours. This way, time tracking by task and billing accordingly would be easy.

Define billing type for your billable hours

Add a list of tasks

You can break down your project into tasks for easy time tracking. It also helps you prioritize workflow for quick completion.

Identifying critical elements of a project can help enhance efficiency. Using a contract maker can help you state these important elements.

Create a list of project tasks

Start recording billable hours

Hover over a task, and click on the “Play” icon to start time tracking. You can pause time and resume at any time.

Time tracking for project tasks

When you end tasks, the time spent on each task is automatically calculated on the timesheet.

Billable hours timesheet

While using Excel isn’t recommended, some small business owners still prefer it.

Below is a guide on…

Using Excel to calculate billable hours

To calculate billable hours in Excel, follow these steps:

  1. Create a column for the date and time an activity started and a different column for when it ends.
  2. In another column, Subtract the start time from the end time using the formula “=end_time-start_time” to get the duration in decimal format.
  3. Format the duration column to display the time in hours and minutes.
  4. Create a column to define the hourly rate for each activity.
  5. Multiply the duration by the hourly rate using the formula “=duration*hourly_rate” to calculate the total cost for each activity.
  6. Use the SUM function to add up the billable amount for all activities.

Using Excel’s built-in timesheet template could also help in more complex scenarios.

Now, let’s discuss time tracking and invoicing.

How do you invoice billable hours?

Invoicing billable hours, which you could also call Time Tracking and Invoicing, is relatively easy when using accounting software.

Picking off from recording the time spent on a project task, you can easily generate an invoice using accounting software.

On your accounting software, you only need to select the project and create a new invoice from within the project.

Creating an Invoice for project billed time

The software automatically calculates the total hours and creates an invoice itemizing each selected task + time spent respectively.

Invoicing a project task based on billable hours

If you are using Excel…

You’ll need to design an invoice or use any of the free invoice templates online.

Then, enter the calculated billable hours manually.

Final thoughts!

Invoicing billable hours is a fantastic way of rewarding yourself for every effort put into delivering a client’s project. It helps you be accountable for the time spent on tasks.

Furthermore, accounting software streamlines your workflow and improves cash flow and efficiency.

Akaunting helps you keep track of your billable hours and manage business finances in one place. You get complete business solutions software from Double-entry accounting to CRM, Inventory, and Project management.

We would love to get you started.

Frequently Asked Questions

What is time tracking and invoicing?

  • Time tracking and invoicing is tracking the time spent on a project or task and creating invoices for that time. It helps your business accurately bill clients for the work done and ensures that you get paid for your time and effort. You can gain insights into productivity and improve processes by tracking time and invoicing.

Explain the invoice tracking system

  • An invoice tracking system allows businesses to keep track of their invoices and payments. It helps automate the process of tracking invoices, sending reminders, and monitoring payment status. Your business can reduce the risk of errors and delays and ensure that you get paid on time.

What are examples of billable hours?

  • Billable hours involve the following but are not limited to planning a project, developing timelines, call time with the client, market research, meetings with the clients over the project, reading and responding to emails relating to the client’s project, and revision of work at the client’s request.

Is invoicing time billable?

  • Generally, the time you spend on invoicing a client isn’t billable. However, providing your client with an itemized list of activities is necessary.

How does hourly billing work?

  • Hourly billing is when you charge a baseline hourly rate for your work on a project. You must have an agreed billing rate with the client before inputting the rate on a time tracking software or excel time tracking sheet.

How do I track hours for an invoice?

  • One way to keep track of invoicing hours is through manual entry on an Excel sheet, but this can be time-consuming. Alternatively, consider using time tracking and invoicing software such as Clockify or Akaunting Projects app.