Boosting profitability in professional services isn't always straightforward. With so many moving parts, from resource allocation to project management, it can be tricky to identify which changes will have the biggest impact on your bottom line.
Yet there's one metric that directly influences profitability: billable hours. By increasing the percentage of time your team spends on revenue-generating work, you can significantly improve your firm's financial performance.
Whether you're managing a small consultancy or a large professional services organisation, these proven approaches will help you capture more billable hours and boost your bottom line.
Billable vs non-billable hours
Let's start with the basics. Billable hours directly generate revenue—they're the time spent on client projects, deliverables, and paid meetings. For professional services firms, these hours are your bread and butter.
Take a typical audit engagement. Your team's time spent reviewing financial statements, conducting tests, and preparing audit reports all count as billable work. The actual client work that pays the bills.
Non-billable hours? That's everything else. Think internal meetings, admin work, professional development, and those endless email chains about project coordination. While these activities are essential for running your business, they don't directly contribute to revenue.
Here's what typically falls into each category:
Top-performing firms usually maintain billable ratios of 75% or higher. Most firms, though, hover around 60%. That 15% difference represents significant untapped revenue potential.
Of course, these numbers vary by sector. A corporate law firm might target 85% billable hours, while a creative agency might aim for 70%. The key is understanding your firm's optimal ratio and creating systems to achieve it.
Challenges in maximising billable hours
Professional services firms face several key hurdles when trying to optimise their billable hours. Let's look at the real issues that might be eating into your revenue.
#1. Time slipping through the cracks
Small time blocks often go unrecorded. A quick 15-minute client call here, a half-hour document review there—these add up quickly. Many firms lose 5-10% of billable time simply because it's not captured properly.
#2. The admin burden
Your senior professionals likely spend hours each week on admin tasks. Client emails, team coordination, and project management can easily consume 25% of a typical workday. That's valuable time that could be spent on billable work.
#3. Resource allocation headaches
Without proper resource planning tools, matching the right people to projects becomes guesswork. You might have a senior consultant overqualified for basic tasks, or a junior team member struggling with complex work. Both scenarios lead to inefficient time use.
#4. Context switching costs
Every time your team switches between different clients or projects, they lose productive time. In fact, it can take an average of 23 minutes to fully regain focus after a task switch. For professionals juggling multiple clients, this productivity drain is significant.
#5. Scope creep
We've all been there, what started as a straightforward project gradually expands. Without clear boundaries, teams often deliver more than what was agreed upon, leading to non billable extra hours. This common issue can reduce project profitability by up to 20%.
#6. Tracking technology gaps
Many firms still rely on outdated systems or manual spreadsheets for time tracking. These methods are not only time-consuming but prone to errors. Poor visibility into real-time data makes it difficult to spot and address utilisation issues quickly.
Understanding these challenges is your first step toward improving billable hours. Next, we'll explore practical solutions to tackle each of these issues head-on.
Best practices to increase billable hours
Smart resource planning can significantly boost your billable hours without requiring longer workdays. Here are proven strategies that help professional services firms maximise their revenue-generating time.
Streamline time tracking: Make it easy for your team to log time accurately. The best approach? Track as you go rather than trying to reconstruct your week on Friday afternoon. Using automated tools like Retain that are integrated with your workflow helps capture those valuable smaller time blocks that often go unrecorded.
Optimise resource scheduling: Efficient scheduling directly impacts billable hours. Look at your team's capacity, skills, and availability in real-time. This helps you assign the right people to the right projects at the right time. A senior auditor shouldn't spend time on junior-level tasks, and vice versa.
Set clear project boundaries: Where possible, start projects with well-defined scope documents. Be specific about deliverables, timelines, and what constitutes extra billable work. This clarity helps prevent scope creep and makes it easier to bill for additional requests.
Reduce admin overheads: Admin tasks can be significantly streamlined through smart automation. Set up automated project updates to keep clients informed without manual effort. Moving project communication to a central location helps reduce time spent searching for information. Regular but brief team check-ins can replace lengthy ad-hoc meetings.
Implement better meeting practices: Not every discussion needs a meeting. Consider whether each interaction requires real-time discussion or could be handled through other channels. When meetings are necessary, set clear agendas and keep client meetings focused and billable. Using asynchronous communication often works better for updates and simple questions. Schedule your internal meetings in blocks to minimise disruption to billable work time.
Train your team: The right training helps your team maximise billable hours naturally. Show them how to distinguish between billable and non-billable work in different situations. Provide hands-on training with your time tracking tools so logging hours becomes second nature. Share techniques for juggling multiple projects efficiently without losing billable time to context switching. Make sure everyone understands when and how to communicate scope changes to clients.
Remember, the goal isn't to squeeze more hours out of your team—it's to help them work smarter and capture all their valuable time.
Software for better billable hour management
Modern resource planning tools have transformed how professional services firms manage billable hours. Let's look at the key features that make a real difference to your bottom line.
1. Real-time resource planning
Gone are the days of static spreadsheets and endless email chains about availability. Today's resource planning tools provide a comprehensive view of your entire team's capacity and skills. You can instantly see who's available and what projects they're working on, making it easier to allocate resources efficiently and avoid overbooking.
2. Smart skills matching
Finding the right person for each project shouldn't be guesswork. Advanced resource management systems now include AI matching to help you quickly and accurately match team members to projects based on their expertise, certifications, and experience levels. This ensures you're using your talented team members effectively while providing excellent client service.
3. Automated time tracking
Manual time tracking is prone to errors and often leads to revenue leakage. Modern solutions integrate scheduling with time tracking, creating pre-filled timesheets based on planned work. Team members can easily log their time against scheduled tasks, ensuring accuracy and saving hours of administrative work each week.
4. Data-driven insights
Making informed decisions about resource allocation requires good data. Today's platforms offer powerful reporting and analytics capabilities through tools like Power BI integration. You can quickly analyse utilisation rates, track project profitability, and identify potential bottlenecks before they impact your billable hours.
5. Seamless integration
The best resource management tools don't exist in isolation. They integrate with your existing systems, from CRM to HR software, creating a single source of truth for all your resource planning needs. This reduces double-entry and ensures everyone works with the same, up-to-date information.
6. Future planning capabilities
Looking ahead is crucial for professional services firms. Modern planning tools help you forecast resource needs and capacity up to 18 months in advance. This long-term visibility helps you make better hiring decisions and ensure you have the right mix of skills to meet future client demands.
Remember, technology should make your life easier, not more complicated. The right solution will feel intuitive to your team while providing the robust features you need to maximise billable hours.
Transform your professional services firm with better billable hour management
Getting billable hours right impacts team satisfaction, client relationships, and overall business growth. By implementing the right processes and technology, you can help your team focus on what they do best: delivering exceptional client work.
Start small by identifying your biggest time-leaks, then gradually implement the solutions we've discussed. Whether it's better resource planning, automated time tracking, or improved project scoping, each change builds towards more efficient operations.
Ready to take the next step? Book a demo to see how Retain’s resource planning software can help.
FAQs about billable hours in professional services
What's a good billable hours target for professional services firms?
Most professional services firms aim for 65-75% billable hours. However, this varies by industry - law firms often target higher percentages while creative agencies might aim lower. The key is finding a sustainable rate that works for your specific business model.
How can I reduce non-billable administrative time?
Resource planning software, like Retain, can automate many administrative tasks like time tracking, scheduling, and reporting. Look for solutions that integrate with your existing systems to minimise manual data entry and streamline workflows.
What's the best way to track billable hours accurately?
Real-time tracking is more accurate than end-of-week timesheets. Use automated tools that let team members log time as they work, preferably integrated with your resource planning system for seamless reporting.
How do I prevent scope creep from affecting billable hours?
Clear project scoping documents are essential. Define deliverables precisely and establish a process for handling additional requests. Regular project monitoring helps identify potential scope creep early, allowing you to address it before it impacts your billable hours.
What should I do if my team's billable hours are consistently below target?
First, analyse where time is being spent using resource management tools. Look for patterns in non-billable activities and identify opportunities for automation or process improvement. Sometimes, low billable hours indicate a need for better resource allocation or additional training.
