What is the difference between billability and productivity?

Do you ever have days – or weeks even – where you work very hard, but have the feeling you’re not getting anywhere? You work too few hours for your customer, barely check any items off your to-do list, and see little progress. Of course, it’s very frustrating, especially if you depend on hours worked for the customer. Because for example, no invoices can be sent or because you did not meet your targets. Or else because you have little progress to show for your work. These are two different things, namely billability and productivity. Although there are similarities, there are important differences too. We’ll explain what these are below.

What are billable hours?

In companies, working hours are usually divided into billable hours and non-billable hours. Billable hours are all the hours you spend performing work that can be charged directly to your customer. Therefore, invoices to customers only show billable hours. The number of billable hours are the hours in which you do work directly related to the customer. These do not include hours spent on internal meetings, administration or sales activities, for example. These are what are known as unbillable hours.

What is the difference between billability and productivity?

Productivity is the number of hours you work compared to your contract hours. If you work 32 hours for customers in your 40-hour working week, and spend the rest of your hours on internal work, you will have a productivity rate of 80%.

Your billability is the number of your productive hours that you can charge to your customer. Each company has its own percentage for the billability rate it aims for; in most companies, this is approximately 70%. Because every company has costs, it is important that most hours worked to generate money too. If the billability is below 50%, a business is considered to be loss-making.

How do you calculate billability and productivity?

You calculate an employee’s billablility by dividing their billable hours by their productive hours. If you want to calculate your billability and productivity, you need to have insight into your hours and work. You can do this by clearly tracking your time, with time tracking software, for example. You calculate your productivity as follows: take your annual contract hours and subtract leave and holidays and time spent weekly on travel and meetings, etc. The remaining hours are called the ‘norm hours’ or the hours that you as an employee can work for customers. Your billable rate can also be calculated by looking at your tracked hours: how many of your productive hours were billable?

As an employee, it is possible to be extremely productive, but not very billable. For example, if a greater number of hours are worked than those agreed to in your contract with a customer, these extra hours cannot be invoiced. This means that not all your productive hours can be charged and your billability will be reduced as a result. It is therefore important to have a good understanding of things such as hours worked, rates, costs and available budget.

How can I get a better understanding of my billability and productivity?

As explained here, everything depends on good time tracking. If you keep proper track of which hours are billable for each project, and which are not, you can make a calculation that gives you an understanding of the difference. This way, you know whether you, your team, or your entire organisation are focused on the right things. If you use TimeChimp for your time tracking, you will automatically gain an understanding of your billability and productivity. It is very easy to have your employees assign their tracked hours to particular customers, projects and activities. Dynamic filter options allow you to see all the control figures immediately. This ensures that you have a solid understanding and overview.

How do you increase your own productivity?

Do you ever struggle to concentrate? Do you find that you are always getting called/emailed/disturbed, just as you are getting into the flow of things? Then you need to increase your productivity. You can do this by going offline for a while. Turn off your phone, inform your colleagues that you are taking a power hour and power ahead! Setting good goals also encourages productivity. Set personal or team goals and track their progress. Good luck!

Would you like to see for yourself how easy it is to keep track of your billability and productivity? Try TimeChimp for 14 days free-of-charge. Any questions? Please contact us on +31-20-7640860, at info@timechimp.com or via our contact form. We’re happy to help.