A lot has been discussed on whether consultants should charge by the hour or apply a standard fee for their services. However, for any consultant, time is money. As such, it is a common practice for most service providers to apply consultant billable hours as their charging strategy. Charging hourly, however, requires accuracy in tracking time spent. Accurately monitoring consultancy hours means that the client will receive accurate invoices for services rendered.
Consultant billable hours are the work hours that the service provider reports as chargeable to the client. Consultants use this system to track time spent, and on which activities the time is spent. By keeping detailed timesheets as a consultant, you can break down the work into individual tasks and events as well as the resources required to handle those tasks. Sometimes, you could be engaged in multiple projects for one particular client. This action brings about transparency that the client will appreciate.
If you are a consultant with several employees or you frequently outsource help, applying billable hours helps you to track time and activities. Each member of staff will keep a timesheet that breaks the projects for the tasks and the time spent working on them.
The consultant billable hours can also be determined through the different billing categories. Billing categories include:
This is the time spent on working for the client, which can be broken down by individual task or assignment.
This is the time spent that you cannot associate with a particular client engagement. Tasks like endless paperwork, skill development, and training, research, and prospecting for new clients fall into this category. If you outsource these tasks, then consultant billing hours from the service providers will also factor in your final tallying of how much you will charge the client.
This category covers time spent on leave, vacation or illness. It also includes the time the consultant did not spend on any project. If you are working under someone or are offering assistance on consultancy tasks, then this category will still feature in your timesheets.
To monitor the hours, you will need three tools: time tracking software, spreadsheet, and billing software.
The time tracking software will help you track the time spent on travel, client engagement, and other tasks. You can use a time-tracking tool on your phone or desktop computer. The number of hours spent on a job will be recorded in your spreadsheet.
You will create a workbook for each client. Using the same workbook for all your clients will introduce a lot of confusion when tracking your consultant billable hours. You will also include the name of the project, the starting date and projected number of hours you expect to work. Add a column for the date each task is performed as well as the number of hours that are spent on the job. A separate column is created for the expenses incurred by the task. Most expenses are applicable for a tax deduction, thus tracking them will keep your finances in order.
The billing software will help you keep track of billing activities. You can opt to bill clients daily or monthly. Make sure you use the time-tracking application to track these invoices. Software tools like QuickBooks work very well as billing software. Using the information from your spreadsheet, you will make sure to indicate what these billed hours are spent on.
Besides helping you to know how much you earn per project, using consultant billable hours techniques also encourage you to work smarter and more efficiently. When you break down projects to simple tasks, you can focus on the individual functions that form the building blocks of the project, while allocating more time for more critical tasks and knowing which jobs you can afford to outsource efficiently.