(Tips and Tricks to calculate your Billable Hours in 2020)

As more and more of us venture into the realm of consulting, one of the things we need to focus on is money. How do you track your billable hours? How do you know how much time you are spending on a project versus the return on it?

What are billable hours?


A billable hour is defined as an hour spent working on a clients project. The work and type of work differs based on the project, the client and the industry you are in. There are however certain tasks that are general to every project.

These may include:
• Planning the project and drawing up timelines.
• Conducting research.
• Performing the actual work for the project.
• Taking part in meetings.
• Revising work on the client’s request.
Now that we know some of the jobs that can be billed, lets look at how to track your billable hours correctly.

1. Set an hourly billable rate for your work


To set this you need to look at your expected annual income or if you are not sure about this figure look at your last two positions in permanent employment and get an average of the two. Once you have this figure insert it into the formula below and you have an estimate figure of your hourly rate.
The Employment Act 229 (Laws of Kenya) gives the hourly rate at Monthly Salary÷225
However, this formula assumes a 52 hour work-week.
international best-practice as below:
• Get the hours per week =Hours per day x Working days(per week)
• Get the hours in a year = Hours per Week x 52 weeks (in a year)
• Get the hours per months = Hours in Year ÷ 12 (months)
• Get Hourly Pay =Monthly Salary ÷Hours Per Month
• Get Daily Pay =Hourly Pay x Hours Per Day

Of course a few things come into play in this determination.
For example your rate would differ for a job you are doing at the clients site (onsite) versus one that you are doing offsite. Say you have to do a pharmacovigilance audit, audits generally you begin from a desk review of the clients scope, documents, records that have been maintained.
This is the followed by an onsite audit. We have found though during this time of COVID-19 where country travel is limited onsite audits have been transferred to virtual audits. In this case then your rates for the two scenarios would differ. We also need to remember to include desk audit in our rate because it is still work we are performing.
Another factor to consider is taxation, you must always factor your rates to include the taxes you are required to pay. For instance if you are operating an online business you are required to pay 1% of gross revenue p.a. If you are declaring as income then you need pay out 30% of earned income to KRA (Kenya Revenue Authority). And so on and so forth.

2. Decide on an Invoicing Schedule


Most consultants work on a monthly invoicing schedule. However some organizations operate in differing schedules. Another option would be invoicing on agreed milestones. The format of invoicing chosen does not really matter, what matters the most is having an agreement with your client and including this determination into your contract.

Also when putting your invoicing schedule try to plan in such a way that payments are coming in a few weeks to when your bills are due (e.g office rent etc).

Lastly, put in your invoicing schedule into your phone calendar so that you can get reminders to send out invoices. This is especially important when you are juggling many clients at the same time. There are many free scheduling apps available for android or apple devices. Check and see the one that suits you best. (You can even simply use google calendar)

3. Track the hours you work on each project

Now that you have the contract (phew!!), remember to track the hours you work on each specific project and also make sure they align with the agreed milestones. There are various app you can use to track your hours (e.g time sheet on google play).

For me, I use the Pomodoro method in my work. The Pomodoro technique is a time management method developed by Francesco Cirillo in the late 1980s. The technique uses a timer to break down work into intervals, traditionally 25 minutes in length, separated by short breaks. Each interval is known as a pomodoro, from the Italian word for ‘tomato’, after the tomato-shaped kitchen timer that Cirillo used as a university student.

The technique has been widely popularized by dozens of apps and websites providing timers and instructions. Closely related to concepts such as timeboxing and iterative and incremental development used in software design; the method has been adopted in pair programming contexts.

So you would set up your tasks either on a weekly or a daily basis. Then under each task you assign some sub tasks. Then assign each task a pomodoro number, meaning the number of 25 minute sessions you need to complete this task. For example: say you need to make a powerpoint presentation and it will take you say 2 hours complete, you would assign this pomodoro number 4. You can go further with most of the apps available to set deadline and assign priority. Then as you do your sub tasks and complete tasks you tick them off and a record is kept of all the tasks you have completed. You can then use this to bill your client based on hours worked on each project.

4. Add up the total number of work hours


You can now use your app or diary, to log the total hours that you spent on the project and prepare it for the end of the billing cycle (monthly or milestone based). Remember when planning your cycles to invoice in advance of when you expect your payment to come. Even if your invoice reflects immediate, remember your clients company have some procedures and workflows that they follow and may not necessarily be in a position to clear your bill immediately (account for this in your billing cycle).

5. Draft a detailed invoice to your client


Be sure to include some if not all of these features in your invoice. • Contact details (phone, email, address) of your business.
• Contact information of your client.
• A breakdown of your professional services for the period.
• The number of billable hours for each service.
• Payment due date.
• Terms and conditions of payment.
• The total amount to be paid, inclusive of any applicable taxes.

Remember if you are working with international clients, use a pre-agreed currency or include both currencies and a conversion rate at the time of billing.

6. Track Non-Billable time


This may not seem important. However, it is you need to know the amount of time you are spending doing emails, Zoom calls etc and see what percentage of your time are you dedicating to these tasks and whether they are impacting your delivery timelines. This is usually what helps you determine if you are better served by outsourcing some activities.

Check out:
Clockify

Pomodoro app (the one I use)

Calendly

By Dr Judith Getugi

Head of Operations SysPharma

LinkedIN @Judith Getugi-Kerini

30th September 2020


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