Ask a freelancer how many hours they worked last week and you will usually get one number. Ask how many of those hours they actually billed and the answer gets slower, and smaller.
That gap is not a failure. Every service business has work that nobody pays for directly: admin, sales calls, proposals, revisions you chose to absorb, learning a client's tools. The problem is not that this work exists. The problem is when it stays invisible, because invisible hours never make it into your prices.
TL;DR
Billable hours are the time you charge a client for; non-billable hours are everything else it takes to run the business. Track both, because your rates have to cover all of your working time, not just the part that appears on invoices. Once you know your real split, set a billable target you can actually hit and price from it. A workspace that separates billable and internal tasks makes this split visible without a second spreadsheet.
What counts as billable, and what doesn't
A billable hour is time you can put on an invoice under the terms you agreed with the client. That usually includes:
- design, writing, development or consulting work on the agreed scope
- client meetings that are part of the engagement
- revisions that fall inside the agreed rounds
- approved change requests
Non-billable hours are the work that keeps the business running but isn't charged to a specific client:
- writing proposals and scoping new projects
- invoicing, bookkeeping and chasing payments
- sales calls, networking and marketing your own business
- internal tools, templates and process work
- learning and skill development
- unplanned extra work you decided not to charge for
That last category is the one to watch. It is where scope creep hides, and it is the easiest kind of non-billable time to underestimate.
Why non-billable time matters for pricing
If you price only from the hours you bill, you are assuming that every working hour is billable. It almost never is.
Here is a simple worked example. Say you want to earn a certain amount each month and you work around 160 hours. If you divide that target by 160, you get a rate. But if only 100 of those hours turn out to be billable, that rate was too low from the start, because 60 hours of real work were never covered.
The fix is to divide by the hours you actually bill, not the hours you work. And you can only do that if you know the number.
Tracking non-billable time also tells you things a billable-only log can't:
- Which clients cost more than they pay. A client with frequent "quick questions" may look profitable on invoices and much less profitable once you count the unbilled back-and-forth.
- Whether fixed-fee projects are priced right. On a fixed fee, every hour above the estimate is effectively non-billable. If you don't log it, you never learn that your estimates run short. Our post on how to scope a fixed-fee project covers this in more depth.
- Where your admin goes. If invoicing and follow-ups take a large share of your week, that is a process problem worth solving, not a fact of life.
How to track both without making it a chore
Time tracking fails when it feels like a second job. A few habits keep it light:
- Track at the task level. Log time against a specific task, not a vague "client work" bucket. It is easier to remember what you did, and the data is more useful later.
- Mark the type when you create the task. Decide up front whether a task is billable or internal. Deciding after the fact invites wishful thinking.
- Create internal tasks on purpose. Make standing tasks for proposals, admin and business development so that non-billable time has somewhere to go.
- Run a timer instead of reconstructing your day. Estimates written at the end of the week are almost always optimistic.
- Review weekly, not yearly. A quick look each week shows drift while you can still do something about it.
In COLO, time is tracked against tasks, and each task has a rate. Tasks can be billable or internal. Only billable tracked time, multiplied by the task rate, counts against a project's contract budget; internal tasks are recorded but not counted. That keeps your non-billable work visible without inflating what the client is charged. You can read how that budget is calculated on the project budgets page.
Setting a realistic billable target
Once you have a few weeks of honest data, you can set a billable target: the share of your working time you aim to bill.
There is no universal right number. It depends on how much selling you need to do, how many clients you juggle and how much admin your setup creates. A freelancer with two long retainers will have a very different split from one who runs many small projects. Instead of borrowing someone else's target, start from your own:
- Measure your current split over at least a month of normal work.
- Decide what is reasonable to reduce. Some non-billable time is essential (sales, learning). Some is waste (manual invoicing, hunting for files, re-explaining decisions).
- Set a target slightly above your current level, not a heroic one. A target you miss every week stops being useful.
- Price from the target, not from total hours. Your rate should cover your income goal using the billable hours you can realistically sell.
If your target and your income goal don't fit together, that is a pricing signal. It may be time to raise rates, change your pricing model or move some clients to a retainer. Our comparison of hourly vs fixed-fee vs retainer pricing and the freelance pricing guide go through those options.
Common mistakes
- Only tracking billable time. You can't manage what you never record.
- Quietly converting billable work to free work. If a client asked for it and it is outside scope, log it as billable and have the conversation, or log it as internal and know you chose to absorb it.
- Treating the target as a moral score. A lower billable share during a busy sales month is normal. The point is to see it, not to feel bad about it.
- Never revisiting rates. Your split will change as the business changes. Your prices should follow.
FAQ
Should I show non-billable hours to clients?
Generally, no. Non-billable time is your cost of doing business. What clients need to see is the billable work and its value. The exception is when you have absorbed meaningful out-of-scope work: mentioning it can set up a fair conversation about the next phase.
Is a fixed-fee project billable or non-billable?
The work is billable up to the scope and fee you agreed. Time beyond your estimate still matters, because it tells you whether the fee was right. Track it either way.
How often should I review my billable split?
Weekly is enough to catch drift. Monthly is a good moment to compare against your target and decide whether anything about your pricing or process should change.
Does COLO count internal tasks against the project budget?
No. Internal (non-billable) tasks are tracked but excluded from the budget calculation. Only billable tracked time at the task rate, plus invoices already raised, counts against the contract total.
Final thoughts
Billable hours pay the bills. Non-billable hours explain why some months feel busy but still come up short. Track both, set a target based on your own numbers, and let that data shape your prices.