How to Calculate Billable Hours as an Independent Contractor

As an independent contractor, time literally is money. But one of the most common pitfalls new professionals make is under-calculating their billable hours. In fact, studies show that professionals who track time manually or from memory leak an average of 15 hours of billable time per week (Source: Accelo Productivity Study).

If you’re wondering why you feel like you aren’t making enough despite “working all day,” the problem usually lies in your definition of billable versus non-billable time.

What is a Billable Hour?

A billable hour is any time you spend actively working on a project that is directly related to a client’s deliverables. This includes:

• Client meetings and consultations
• Project research and planning
• Actual production (coding, writing, designing, consulting, etc.)
• Revisions and edits requested by the client
• Communication specifically pertaining to their project

Essentially, if a task moves the client’s project forward, it should be tracked and billed.

What is Non-Billable Time?

Non-billable time is the administrative overhead required to run your own business:

• Invoicing and bookkeeping
• Marketing and pitching new clients
• General education and upskilling
• Networking

Many freelancers try to “absorb” the cost of administrative time. Instead, your standard hourly rate should be set high enough to account for these non-billable hours. As pricing expert and author Brennan Dunn notes, “If you aren’t tracking your administrative overhead, you don’t actually know what your effective hourly rate is—and it’s probably much lower than you think.”

How to Calculate and Track Effectively

The easiest way to track billable hours is to use a dedicated time tracking app.

1. Set Custom Rates: Assign a specific hourly rate to a client or project upfront.
2. Track in Real-Time: Don’t rely on your memory or spreadsheets at the end of the week. Hit “Start” on your tracker the second you begin working.
3. Generate Clear Invoices: Your invoices should itemize your hours clearly so the client knows exactly what they are paying for.
4. Export Your Records: At the end of the month or quarter, export all your tracked sessions to a CSV file to hand over to your accountant or for tax preparation.

A quick 15-minute email might not seem like much, but doing that four times a day across multiple clients adds up to a full unbilled hour. Track everything.

Using a fast tool ensures every minute is accounted for locally on your device, making it effortless to bill your clients accurately.