Date created: Dec 07, 2023 • Last updated: Feb 07, 2024
What is Billable Utilisation?
In an hour-based agency, the billable utilisation serves as a crucial metric, representing the percentage of billable hours employees spend on billable client projects. A higher billable utilisation indicates optimal efficiency and resource allocation, while a lower rate may suggest under-utilisation or potential areas for workflow improvement.
Billable Utilisation Formula
How to calculate Billable Utilisation
The billable utilisation of 1 person in 1 month: Scheduled Hours: 184 Leave | Public Holidays: 8 Adjusted Scheduled Hours: 176 Leave | Private Holidays: 16 Leave | Sickness: 12 Leave | Specials: 2 Available Hours: 146 Non-Billable Hours: 28 Billable Hours: 118 Billable Utilisation: 81%
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What is a good Billable Utilisation benchmark?
The billable utilisation should be positioned between 70%-80%. Above 90 to 95% your company starts running human risks such as burn outs, employee turnover and quality deterioration. Below 60% your company starts running into cashflow risks which negatively impacts employee perception of job security, acquisition opportunities, shareholder dividends and financial flexibility to invest in R&D projects.
More about Billable Utilisation
Tracking the metric
The most cost-effective and least complex setup uses dedicated software solutions that have all components shown in the metric formula present into one single system. This setup allows contractors and employees to see for themselves how well they are performing relative to their targets. Properly functioning and intuitive Billable Utilisation tracking tools are: Float, Productive and Timeular. Each of these tools have price ranges of 10 to 25 USD per month per user depending on the feature-list.
Inserting metric into data model
When you want to have a solid understanding whether your company is an effective billable hour machine, the most common setup is by attributing the billable type to each employee whether the person's role is focused on being either billable or non-billable. For example customer support, finance, sales, marketing and general staff are in general non-billable. A common setup used is by structuring the source system based on departments. Each department is either billable or non-billable. This setup has the benefit that the billable utilisation target of for example 80% can be distributed across lets say 12 people. Team based attribution of the billable type enables a more organic and natural distribution of tasks. Junior people tend to hit 90-100% utilisation and more senior people can reach 50-60%. Senior people tend to have lower ratios, since they are more involved with personal development, sales support, client meetings, planning and strategy.
Natural companions of the metric
The billable utilisation on itself tells you limited information on how financially healthy your company is. Therefore the most commonly used metric alongside the utilisation ratio is the contribution margin. You can have a great utilisation, but when your sales team is giving significant discounts on hourly rates then your company could actually be struggling.