How can you reduce the non-billable hours of your projects?

For many service companies, every hour counts. However, some tasks are unavoidable even though they do not generate revenue. These non-billable hours can then weigh heavily on profitability. They are also a key indicator because they help to estimate the price of services.

But then, how can we reduce these non-billable hours ? In this article, we offer you a guide to understand and limit this working time that can threaten your profitability.

Understand: why are some working hours not billable?

Although some hours are counted as non-billable, they are nevertheless well worked. Indeed, they are said to be non-billable because they do not directly generate income but are unavoidable: they ensure the proper functioning of the company.

However, these non-billable hours are proving to be problematic for IT Services, agencies, firms and other structures offering services, because it is precisely time that is billed.

Non-billable time is considered to be any time overrun in relation to the initially planned time target. However, non-billable hours should be avoided because the price of the service has generally been set in advance with the client. Unless negotiations are held, an overrun cannot be invoiced, but has an impact on the budget forecasts.

So, what do these billable hours mean? In reality, this category encompasses many activities, such as:

• internal projects : such as the implementation of processes, the development of tools, training, networking or administrative management,
• mistakes made by an employee that generate a negotiation on the part of the customer,
• a business strategy that consists of offering certain hours on specific tasks to retain a customer,
• A poorly defined set of specifications that generates unnecessary work, which the client will refuse to pay.

Follow-up of utilization rate by role and by team in Stafiz 

With this visibility, you can script the load to improve visibility over the next few months. By analysing this over the next few weeks and months, with the capacity of employees (taking into account leave and occupancy rates), you can already pre-staff. You are also able to allocate the remaining capacity on internal projects, the famous hours that are usually not billable.

How do I track non-billable hours?

A high number of non-billable hours reduces margins, so it's important to learn how to quantify them accurately. However, tracking non-billable hours also serves other purposes:

• Identify time-consuming non-billable tasks to determine their necessity.
• arbitrate priorities,
• facilitate the preparation of quotes thanks to accurate estimates,
• Identify the most profitable customers to focus on.
• Measure the effectiveness of teams.

Time tracking is therefore essential: it allows you to know precisely how many hours your employees spend on revenue-generating tasks. Project management software like Stafiz then provides a holistic view of billable and non-billable hours and makes it easy to calculate the billing rate (billable hours / available hours, excluding holidays and holidays).

In addition, Stafiz also makes it possible to consolidatea project. By distinguishing between external and internal activities, you make it easier to sort out non-billable hours. 

Customizing a Mission in Stafiz

You can then view the breakdown of non-billable hours by person or by assignment. 

Set expectations and goals for non-billable hours

An effective way to reduce unbilled hours is to set your policy, both at the company and project level.

Follow up regularly

At the project level, the project specifications are key because they make it possible to clarify expectations. In addition, it is necessary to carry out follow-up points during the project with the client but also internally, especially when the consultants are mainly under management.

Set goals

Another effective way to reduce non-billable hours is to set targets that should not be exceeded. This helps to empower the teams, who then have every interest in limiting or optimizing billable or non-billable time.

Optimize processes to reduce non-billable tasks

The best way to reduce non-billable hours is to optimize your processes to increase efficiency.

Dedicate a dedicated time slot to non-billable hours

Some non-billable tasks such as administrative tasks are predictable and incompressible. However, you can group them into blocks to avoid spreading yourself too thin; This maximizes concentration and therefore efficiency. 

In addition, using project management software helps you in this process:

• Time tracking helps you gain visibility into the distribution of time spent to organize your agenda accordingly,
• The automation of certain tasks, offered by certain tools, saves time. 

Allocate resources strategically

Another way to improve processes is to optimize billable time through efficient resource allocation.

Thus, it can be strategic to mobilize junior profiles, which are less expensive, on accessible missions, while the most challenging missions are entrusted to more senior profiles whose work costs are higher.

Another approach is to use tools like Stafiz's scenario builder to automate the resource planning from the data.

Your resource allocation becomes more reliable and faster

Our resource planning

Stafiz also makes it possible to automate invoicing and get paid faster, which limits non-billable hours related to invoicing (sending invoices, reminders, etc.). Stafiz offers unpaid reminder features, triggering by deliverables or automatic generation, thus freeing up time for high value-added, billable hours.

Organizing management

Some management approaches can reduce non-billable hours. 

For example, the lean management methodology or sprint organizations include frequent milestones that limit operational inefficiencies through frequent checks. These methodologies remain popular with IT Services Because they allow you to maintain visibility, even though employees are busy with customer projects 90% of the time.

In addition, setting up a structured project management, with a clear validation workflow and a system of deliverable notifications, streamlines collaboration. This helps to limit delays or errors, reducing non-billable hours.

Arbitrating on internal activities

Non-billable hours are essential. However, it is possible to arbitrate internally to decide how to manage them.

For example, favouring long-term assignments can be a strategy because it avoids administrative procedures.

In addition, the study of utilization rate allows you to identify the most favourable times to move forward on internal projects.

Track the overall financial health of projects

Finally, reducing non-billable hours is part of a more global strategy that consists of monitoring the overall financial health of projects. These can impact time objectives and profitability. It is therefore essential to monitor and analyse them in order to anticipate potential budget drifts. Time allocation tracking by project and by team, facilitated by the resource planning, limits the deviations.

Non-billable hours are inevitable: administrative tasks, training, networking or mistakes, they are an integral part of a company's activity. However, they can have a significant impact on profitability, particularly in agencies or IT Services. Hence the need to adopt a clear strategy to regulate and limit them.

Unfortunately, there is no miracle solution. However, by optimizing your processes, defining clear internal policies, and aligning management with business strategy, you can reduce these non-billable hours to strengthen your competitiveness as a company.