Entrepreneurs often joke that they have so
much more freedom than the average employee. They can freely choose which 18
hours in a day they’ll spend working. This grim reality isn’t too different for
legal professionals, accountants and consultants, who bill their services by
hour or by project. In addition to the billable work, they spend a significant
portion of their day on administrative necessities, discovery meetings,
consults, networking, and in some cases, sales and marketing for their own
services. These are all hours worked, even if they can’t be billed to a client.
At the end of the day, the billed hours and
projects need to offset the investment of time into these supporting
operations. But do we ever really know how much time we spent on these tasks?
Billing your clients accurately is a challenge
in itself. Since we earn a living from the payments we receive, we all come to
the point where we need to implement efficient and simple billing processes. We
need systems, which ensure that even when working for several clients on the
same day or even in one hour, we can accurately report and bill them for the
time we spent on each client.
When
charging by the hour, most service providers choose time tracking software which
helps them track work and billing for various clients and projects. It only
takes a month or so to get used to timer management, reporting, and invoicing.
But what if we charge based on project or task
completion? Are the hours still important in this case? Since we still invest
our time, it is even more important to know how much time was spent on each
task. At the end of the project, the time expenditure is what defines how
successful we were, and how profitable individual projects are. Based on this
data, you can optimize your business model and ensure that your efforts and
time investment are accurately reflected in your pricing.
Of course, tracking time invested also allows
both types of service providers to evaluate the administrative overhead and
time invested into non-billable services. Only once we have a detailed
understanding of the balance between our project pipelines and cash flow, as
well as the real costs of non-billable hours, can we reliably define our
service pricing and project our revenue growth for the future.
