The question of billable hours or non-billable hours can be summed up in a few lines, or it can go on for a lengthy discussion session because, similar to SQL (Sales Qualified Lead) and MQL (Marketing Qualified Lead) dilemma, each agency has its definition of billable and non-billable hours.
An agency, let's say, Pizza Pal, bills you only for the hardcore development work that it promises, while another agency, let's say Burger Buddy, bills you even for the audio/video consultation and meeting time because you still utilized their developer's time for your project, regardless of whether it is hardcore development work or not. They still consider it worthy of putting it under the billable section.
There are no right or wrong answers here. It's just the process an agency adapts and the ideologies one follows. Burger Buddy thinks their time is so valuable that they only give the first 15 minutes of consultation free and then charge by the hour. Pizza Pal considers that only coding work or actual development is billable, and the rest of the time spent on the project is part of it. The client doesn't have to pay for it.
Let's understand tasks in a project and what the companies believe is billable or non-billable.
Active development
Any time spent actively working on coding, debugging, or implementing features directly related to the project can typically be considered billable. This includes writing and testing code, fixing bugs, and integrating new functionalities.
Verdict: Both Pizza Pal and Burger Buddy consider these billable tasks.
Meetings and consultations
If developers are required to attend meetings, discussions, or consultations directly related to the project. Examples include project planning meetings, code reviews, or client discussions to understand requirements or provide updates.
Verdict: Pizza Pal considers this non-billable, while Burger Buddy considers this billable.
Research and problem-solving
Sometimes developers need to research solutions, investigate issues, or troubleshoot problems arising during development. The research work directly relates to the project and contributes to its progress.
Verdict: Pizza Pal considers this non-billable, and Burger Buddy considers this billable.
Documentation and code reviews
Time spent writing documentation, creating technical specifications, or reviewing code can often be considered billable. These activities are essential for maintaining code quality, ensuring clarity, and facilitating collaboration among team members. Agencies quote the clients the charges inclusive of these tasks since they are crucial.
Verdict: Pizza Pal considers this non-billable, and Burger Buddy considers this billable.
Support and maintenance
If developers must provide ongoing support or maintenance for a project after its initial development phase, the time spent on these activities is typically billable. This includes addressing user inquiries, fixing bugs, deploying updates, or maintaining the project infrastructure.
Verdict: Both Pizza Pal and Burger Buddy might agree to offer a few months of free support and maintenance, and then the client pays for the ongoing support and maintenance. It's like buying any software product. In the lowest-grade plan, you get regular support, but in upper-grade plans, you get premium support and maintenance. The same applies to the service sector also.
Think of Apple and other mobile manufacturers. They all used to give chargers with every phone they sold. Now, Apple has stopped providing mobile chargers. Users have to pay to get one.
Previously, chargers were necessary from the company's and user's point of view. Right now, it is a necessity only from the user's point of view. The company has labeled it as a nice-to-have accessory, assuming that you already have a charger with you and they don't have to give it for free.
Internal meetings
Time spent attending internal team meetings, training sessions, or company-wide meetings that are not directly related to a specific client project. These meetings are typically aimed at enhancing collaboration, sharing knowledge, or discussing internal processes.
Verdict: Both Pizza Pal and Burger Buddy consider these non-billable. Clients shouldn't pay for an agency's internal collaborations.
Administrative Tasks
Activities such as filling out timesheets or performing administrative duties that are not directly tied to the development work. These tasks are necessary for project management and organization but do not directly contribute to the client's project.
Verdict: So, if the tasks do not directly contribute to the client's project, then those tasks go to the non-billable section, and Both Pizza Pal and Burger Buddy agree to that.
Non-project-related work
Any work that falls outside the scope of the client project or contractual agreement. This could include personal projects, internal research, and development, or marketing or business development work.
Verdict: Non-billable, as agreed by Pizza Pal and Burger Buddy.
Downtime and interruptions
Unplanned or unexpected interruptions, technical issues, or periods of downtime prevent developers from actively working on billable tasks. These interruptions could include system outages, equipment failures, or waiting for client feedback or approvals.
Verdict: Non-billable as per Pizza Pal and Burger Buddy.
Non-productive activities
Activities that are not directly related to development include personal internet browsing, social media use, or breaks. Developers must manage their time effectively and minimize non-productive activities during working hours.
Verdict: Pizza Pal and Burger Buddy consider this non-billable.
Learning and skill development
Continuous learning and skill development are essential for developers, time spent on self-study, training courses, or acquiring new skills that are not directly tied to a client project and definitely up for debate.
Verdict: When the learning is not tied directly to the client's project, then Pizza Pal and Burger Buddy consider these non-billable. But what if the learning for the client's project specifically? Then, Pizza Pal considers this non-billable, and Burger Buddy considers this billable.
What if the accounting team doesn't invoice a billed hour? Is it considered billable?
If the accounting team doesn't invoice a billed hour, it will create a discrepancy between what was considered billable by the developer and what was invoiced to the client.
In such a case, it's essential to investigate and address the situation to ensure accurate billing and financial records. However, these discrepancies are obvious to occur due to any of the following reasons.
Oversight or error: The accounting team may have unintentionally overlooked the billed hour or made an error during invoicing. Mistakes can happen, and it's essential to communicate with the accounting team to rectify any discrepancies.
Billing dispute or adjustment: There may be a dispute with the client regarding the billed hour, or an adjustment might be required based on contractual agreements or project changes. The accounting team may hold off on invoicing until the matter is resolved or adjusted.
Internal approval processes: Some agencies may have internal approval processes, where specific individuals or departments must review and approve billed hours before invoicing. If the approval process is pending or delayed, invoicing the billed hour may be delayed.
Contractual terms or agreements: Certain contractual terms or agreements between the agency and the client may affect billing and invoicing timelines. For example, the client may request monthly invoices, or there may be specific billing cycles that impact when hours are invoiced.
You can't pull all the options on your side because the farther you swing the pendulum in one direction, the greater its momentum on the opposite side. The idea is to aim for balance.
