Stop Giving Away Your Time

How much are you giving away to clients because of omissions and "guesstimates" about the amount time spent on a project? Do you question what can be charged back to the client, write off an hour spent on a project because you like your client or don't want to be seen as a penny-pincher? Would you like to stop "subsidizing" clients that are affecting your quality of life? This month we discuss how to tell billable and non-billable time apart, and learn how you can bill for more of your time.

Track All Time.
It is important to know how much is eaten up in administrative time, billing, looking for lost files or other time that you cannot charge out. When administration time is justified as billable it can be entered on the invoice as a line item, usually at a lower hourly rate than creative. Alternatively, many firms calculate administration and clerical by incorporating it in their mark-up as an overhead cost, similar to the way a mechanic recoups shop costs. Educate your staff on the importance of tracking all time spent on a project.

Bill More Time, Period.
Clarify what constitutes billable time. Any task/work that would not be done if the project did not exist should be tracked and considered billable time. Billing in 15-minute increments ensures you get paid for smaller amounts of time, like the 5 minutes you spent looking up a previous job for a client.

Examples of Billable Time.
Make sure that your definition of "billable" time is sufficiently broad (any time specifically tied to a project is billable). That includes:

There are grey areas where you may end up giving away time. Example, an established client phones; they spend 15 minutes talking about a project and 15 minutes chatting about their kids and the home renovations they are doing. Bill for the full 1/2 hour, as you would not have been talking to the client if it weren't for the project. Educate the client that your time is valuable.

Examples of Non-Billable Time.

Show Non-Billable.
Keeping track of the non-billable time or additional time not only provides accountability, but a tally of the additional hours that were spent on the project billed at $0.00. By clearly showing non-billable items, your pricing is better understood and satisfied clients pay their invoices faster and will increase perception of the project's value. See six steps to pricing your services well.

Less Administration = More Creation.
Analyze the details of why the amount of non-billable time is as high as it is. Ways to speed up the admin process should be discussed. Cutting down on these types of non-billable tasks frees up time for billable creative. Detailed time entries regarding non-billable give insight on any potential time vortexes or black holes that need addressing.

Review All Time Entries.
At the point of billing, you should review all time spent on the project and make decisions about what details and line items are going to be included. For example, the 5 minutes that it took to email files for the project may appear minor but combined with the additional calls and interruptions from the client, justifies the half hour charge for project coordination, etc.

Don't Stop.
Continue to track all time spent with a client even after a project is closed. Create a docket or project for miscellaneous time for your clients when they call in with requests for files or maintenance after a job has closed. Have everyone on your team enter time when a client calls with a request, comment, or revision. When reviewed at the end of the month, a series of small 5-minute changes can add up to enough for an additional invoice of an hour or two, or can be included on the client's next bill.

What is your Utilization Rate?
Determining your utilization rate is a quick, easy way to determine the current health of billing practices in your company.

"With a normal client mix (i.e. no single client source that accounts for more than 25% of the Agency Gross Income) A firm should be capturing 60% of the total time available. Individuals within that group will bill at far more or less than the group average, but the group itself should be at 60%"(1)

Increasing your billing efficiency by even a marginal amount can have a substantial impact on your bottom line. Example: Let's say your firm's current billing efficiency is at 60% (24 hours out of a 40 hour work week). Capturing and billing an additional 24 minutes/day equals an increase in billable efficiency of 5% - the effect on the bottom line however is an increase of over $10,000/year per employee!

% BillableBillable hrs/week
from 60%
60%24 - $100$2400$124000 -

What would increasing billable efficiency by even one percent mean to your bottom line?

(1) Systems, Utilization, and subsidizing clients: Part 1: Measuring. 1. by David Baker of ReCourses