The benefits of tracking billable time are well established — it’s the most reliable way to account, and more importantly, get paid, for client work. What about the time spent on non-billable work? You won’t get paid for it, but there are three reasons why you should still track non-billable time.
Calculate project cost and profit
Every project will accumulate some non-billable time. Even though it’s not being billed to the client, non-billable time is an expense that will decrease your margins. To calculate the true cost and profitability of a project, the non-billable time should be included.
The more you track non-billable time, the better you will be able to anticipate unknown unknowns when estimating future client work. And the more accurate your estimates, the more predictable the profit.
The difference between a good agency and a great agency is that the great agency will go the extra mile for their clients. They want their client to succeed just as much, if not more, than the client does. So they spend a few extra hours on the project, putting their best work forward regardless of the amount billed on the final invoice.
It may only be a few hours here and there, but track the non-billable time and include it on your next invoice. The goodwill generated by such a gesture will build the foundation of a long lasting client relationship. In return, you’ll receive bigger budgets and more creative freedom.
Non-billable work is equally important
Just because the client isn’t being billed for your work does not mean it’s unimportant. The forward thinking agency will be allocating some of its time to internal projects to help promote their work and explore new revenue streams.
Marketing, research, and development, are all great uses of agency time. But each non-billable hour spent on them is one hour less billed to a client.
It’s important to track those hours because they are equally as important as billable work. Knowing how much time is being spent on internal projects will factor in to future planning, so you know how much time to safely allocate to exploratory work while staying profitable.