Streamlining billable hours tracking for MSPs: best practices and tools for tracking
Efficient time management is critical to ensuring the profitability and longevity of your MSP business. Understanding how to effectively utilize resources to maximize the number of clients you can take on without sacrificing service standards is key to a scalable growth strategy.
Understanding the distinction between billable and non-billable hours is also key to success: Billable hours refer to time spent on tasks related directly to client projects, while non-billable hours apply to internal activities not directly tied to client projects. Non-billable hours might include time spent on general meetings, administrative tasks, or training unrelated to client work.
Keep reading for a breakdown of best practices and tools to help you properly track your billable hours along with tips for better resources utilization.
Why tracking billable hours is important
Tracking your billable hours goes far beyond just revenue generation. In fact, it’s a critical practice that delivers tremendous value to your entire organization. Here are a few reasons why implementing billable hours tracking best practices is in your MSP’s best interest.
Optimizing business revenue
Accurate billable hours tracking enables MSPs to quantify the time invested in each client project. Armed with this data, you can determine the true cost of the services you provide—which empowers you to set more competitive prices and maximize revenue as an organization by increasing billable consulting time. For more information on how to make the most of your revenue, check out our 2023 MSP profitability report.
Identify profitable services
By tracking your billable hours and correlating these with specific services you offer, pinpoint precisely which offerings drive the most revenue for your organization. This information provides insights into resource allocation, helping you focus on the services that drive the highest return on investment (ROI). Other metrics that can help you identify profitable services include your customer satisfaction scores, monthly recurring revenue, and load analysis.
Efficient resource allocation and management
Tracking your organization’s billable hours helps to allocate resources efficiently and effectively. With this data, you can assign the right IT professionals to projects based on their unique skill sets, ensuring that your clients receive high-quality service while optimizing labor costs internally.
If you’re curious how your utilization rate stacks up against best-in-class MSPs, you can use our resource utilization calculator tool to calculate your impact.
Once you are armed with accurate billable hours tracking, your team can estimate future project timelines, more effectively allocate resources, and plan out future staffing and revenue needs.
Client transparency
Keeping detailed billable hour data helps foster transparency with your clients. By delivering a clear breakdown of time spent on different tasks and projects, you build trust and minimize any questions or concerns that could arise.
Performance measurement
Regardless of the size of your team, tracking billable hours allows you to effectively measure productivity and efficiency. Understanding the length of time each task takes empowers your organization to set standards, identify top performers, address training needs, and reward exceptional performance. Solutions like BrightGauge are especially effective here, providing customized dashboards and reports to inform your performance measurement.
Forecasting and scaling
Once you start tracking billable hours over a long period of time, you’ll have access to critical data to inform future business decisions—including growth. Use this data to guide strategic decisions about scaling your operations, hiring additional staff members, or expanding your service offerings.
Best practices for tracking billable hours
What are the best practices for tracking billable hours with your team? From standardizing time entry to differentiating between billable and non-billable hours, understand these best practices and incorporate them into your organization’s standard operating procedures.
Utilize a time-tracking tool
Research and identify a reliable and effective billable hours tracker that allows for real-time entry of hours throughout the workday. With the prevalence of hybrid and remote work, many professional services automation (PSA) solutions or project management tools are equipped with time tracking and billing features out-of-the-box.
Additional features may include online timesheets, online invoicing, alerts, reports, analytics, and user management. It’s equally important that you can track time to specific clients or projects to make sure you are managing to budget and fulfilling SLAs.
Depending on your team members’ roles, you may also opt for a time-tracking software that has a mobile app—ideal for any time-tracking spent with a client or on the go. Lastly, it’s important to make sure your time-capturing tool has comprehensive reporting dashboards so your team can turn insights from the tracking tools into actionable directives.
Establish a time-tracking process
Once you’ve identified the right time-capturing tool for your needs, define a clear process for your team members on how to track billable hours. This means a clear explanation of billable vs. non-billable hours as well as setting expectations for rounding time.
Some organizations choose to have employees round up to the nearest 10, 15, or 30 minutes when logging time on projects. No matter which option you choose, make sure you communicate expectations clearly to both your clients and your team members.
When setting this process, it’s important to address time leaks—when potentially billable time goes untracked or missing. Time leaks can be a major problem for tech businesses, resulting in less invoicing, less revenue, and less profit for your organization.
Educate your employees on the importance of billable hours tracking and establish regular training sessions, highlighting how your technicians should enter their time and how time entry impacts the company overall.
Regularly review and analyze hours
Once you’ve onboarded your team with standard operating procedures for billable and non-billable hours, establish consistent reviews to track and analyze both billable and non-billable hours. Setting aside time each month will help you identify any patterns, understand overall project progress, and make adjustments for added efficiency and productivity.
With this said, the data that comes out is only effective if your team is inputting time tracking accurately. Your time tracking tools should have customizable, real-time metrics to allow you to make informed business decisions about staffing, outsourcing, and taking on new business.
For more information on how to effectively manage your resources, check out our webinar, Efficiency Matters: Harnessing Automation for Streamlined Billing.
Communicate with your clients
Providing your clients with timely and accurate billable hours tracking not only provides clear insights—but it also builds trust and helps them understand the value they’re receiving.
Set clear expectations with your clients on what a billable vs. non-billable hour is, increments of billable hours, and what they can expect from an invoice each month. This helps thwart any confusion, questions, or frustrations upon receiving an invoice. Solutions like Smileback can help inform how you handle client communications by soliciting and collecting customer feedback, including on your invoicing process.
Offer employee training
Consistency is essential when tracking billable hours—and if team members are inconsistent or inaccurate with their time tracking, it leads to challenges across the organization.
Educate your team on the importance of accurate and daily time-tracking, establishing clear guidelines to ensure that all team members are aligned.
In addition, foster a culture of accountability and transparency. Send out weekly reminders for employees to ensure that their billable hours tracking is updated, set weekly office hours to answer any time tracking questions, and onboard new employees with comprehensive training on the process.
Streamlining billable hours tracking with PSA software
Streamlining billable hours and managing resources effectively is critical to growing your MSP and increasing profitability. Having an accurate view of billable hours will maximize productivity and help eliminate non billable time, allowing your team to take on more clients with ease.
ConnectWise PSA is an award-winning solution designed to increase your revenue by improving operational efficiency and visibility. Robust time tracking features can help maximize utilization and consistently meet SLA commitments, coupled with automated billing, invoicing, and approvals to expedite internal workflows. Watch an on-demand demo to experience the power of PSA for yourself.