Billable Hours Calculator

The billable hours calculator converts working time into a monetary value. By entering the hourly rate and the amount of work done, it calculates the billed amount. This version combines four functions: invoicing fixed prices, rounding working time to defined billing units for individual tasks, measuring actual proportion of billable hours per day, as well as forecasting annual working hours and income.

What counts as billable time?

Billable time is the time spent working on a client's behalf that can be charged to the client. This includes things like creating documents, doing research, making phone calls with clients, and correcting within the scope of the contract. Non-billable hours are still work done, but they do not directly charge the client for internal meetings, training, sales activities or invoicing. There are also activities that fall in between, such as travel time to a client, which will need to be determined by the specific agreement on how it is charged.

Four modes:

Select the mode that best fits your question. In each mode, only the required information is entered. The amount billed will be determined in most cases by multiplying the hourly rate by the number of hours worked and adding any discounts or overheads. The time and billing units options are for processing individual tasks where the time taken is rounded up to a defined billing unit. The utilization and effective price functions compare the billable hours with the total working hours. Yearly hours and income will extrapolate typical daily conditions over an entire year.

Amount invoiced

The basic formula is very simple.

If you bill for 40 hours and the hourly rate is $150, then your bill will be $6,000. If the adjustment feature is enabled, the calculation tool will deduct a certain percentage as discount and add the cost that was originally inputted.

For example: if you bill for 120 hours at a rate of $70 per hour, your invoice will be $8,400. If a special discount of 15 percent is applied to that amount, then the invoice total would be reduced to $7,140.

Time and Billing Units

Lawyers do not usually bill by the minute. Instead they round individual tasks up to a fixed unit of time which is then billed at an hourly rate. The most common unit of time is six minutes, or one tenth of an hour, which equates to 0.1. A task that takes 22 minutes would be rounded up to four units, or 0.4 hours. If the hourly rate was $150 then the charge for this task would be $60.

The following graphic shows how minutes are converted to billable hours using time units.

Other modes increase processing speed at the expense of accuracy. The 15-minute mode (0.25) is suitable for longer work sessions with few task switches. The three-minute mode (0.05) is more accurate but harder to use continuously. The calculator tools support intervals of 3, 6, 10, 12, 15 and 30 minutes.

Utilization rate and effective hourly rate

The utilization rate is the percentage of hours worked that are billable. This is the single best measure of how much time is actually being converted into revenue.

If 6.3 hours are recorded as a nine-hour day, the utilization rate is 70 percent. The revenue is calculated by multiplying billable hours by the hourly rate and then dividing that amount of revenue by total hours worked to get the effective hourly rate.

At a $200 hourly rate, these 6.3 billable hours result in $1,260 of revenue. If this is spread out over the total 9 hours, the effective hourly rate is $140 per hour rather than $200. This difference represents the cost of non-billable time and shows that a high apparent hourly rate does not necessarily lead to higher revenues.

Annual hours worked and sales.

Even if you only look at the results of a single day, many things cannot be seen. If this is extrapolated to an entire year, then the numbers become more concrete.

If you bill 5 hours a day across a 220 day year, that's 1,100 billable hours. At a rate of $150 per hour, that's an annual salary of $165,000. Based on the 8 hours available each day, your utilization of billable hours is about 63%. Frankly, industry statistics show that many lawyers average less than 3 hours billed per day. So a goal of 1,800 hours may actually mean working more like 2,400 hours.

What is a realistic capacity?

A healthy range is between 65 percent and 80 percent, though this varies by industry. In law firms, associate billable utilization rates generally range from 70 percent to 85 percent; in consulting, they range from 70 percent to 80 percent; and in accounting, they range from 60 percent to 75 percent. Utilization below 60 percent usually indicates problems with overhead or timekeeping. Consistently exceeding 85 percent is often not a cause for celebration but rather a warning sign of burnout.

Tips for correct billing:

Track your hours as you work and don't wait until the weekend to do it when you can barely remember anything. When trying to reconstruct a timesheet for several days after a week has passed, there is usually 10% - 20% of billable time missing. Write down a specific description with each entry and give your client not just a general term like "case work" but something more specific like "reviewing an application." Use consistent billing units and never round tasks up to whole numbers in order to artificially increase the invoice amount. Accurate documentation will protect both your income as well as your clients' trust.

This tool is for general planning and informational purposes only and does not constitute legal, tax or accounting advice. Billing rules can vary by jurisdiction, bar association, and contract agreement. Please verify applicable billing units and rounding policies before issuing an invoice.