Billability Matters Now More Than Ever: What You Need to Know

If you work in a professional services firm, you’ve probably heard billability thrown around in conversations about performance, profitability, or project planning. 

But what does it really mean, and more importantly, how do you make it actionable? 

How billable is your team? 

Billability (aka billable utilization) measures time spent on work that can be billed to clients or projects against their capacity. 

This metric is important for PMs to be aware of because it measures a more nuanced productivity that can reveal various strengths and vulnerabilities in the way a team’s projects are managed.

Which is why, from my perspective as a project manager, billability is not just a reporting KPI. It’s more akin to a pulse check on how well your people, processes, and priorities align with the bottom line:

Billability is ultimately concerned with maximizing the time we spend on work that directly contributes to revenue. 

Simultaneously, we have to make sure we aren't burning people out or losing sight of activities that provide long-term value.

Here’s what billability really is, how it’s often misunderstood, and what professional services firms can do to better track, manage, and improve it with practical tips and easy-to-use AI for project management. 

We’d also be remiss if we didn’t mention AI here, specifically how the rise in AI tools for professional service businesses directly impacts the billability of teams. Read on to learn more.

What you’ll learn: 

• What is billability?
• Why project managers should care
• Billability vs utilization: Are they the same thing?
• Why is billability a strategic metric?
• How to calculate billability
• What’s a good billability target?
• 8 strategies to effectively manage billability
• How AI tools are redefining billability
• What to avoid
• Questions to ask

What is billability?

Billability measures the proportion of working hours that can be charged to a client. It’s the percentage of time someone spends on revenue-generating activities like project deliverables, client calls, or research tied to billable work.

Billability isn’t a binary metric and context matters; it’s more nuanced and multi-dimensional, which you can see from the list of the different types of billability listed below:

1. Role-based billability

Certain roles, like consultants, engineers, and developers, are inherently billable because they engage directly with client work. 

Others, like HR managers, finance teams, or operations specialists, perform internal functions that support the business, but their time typically isn’t billed directly to clients.

As project managers, understanding which roles are billable helps us design balanced teams that support both delivery and organizational health. 

For example, a project may require one high-billability consultant, but also a non-billable project coordinator to handle internal tracking and risk reporting. That can still be a smart investment, but the implications for margin and workload need to be transparent.

2. Task-Based Billability

Even within a billable role, not every working hour is billable. Let’s say a senior consultant spends 30 minutes responding to internal emails and one hour preparing an invoice. That time is necessary, but not billable. 

Meanwhile, a 90-minute client presentation or a site visit is typically 100% billable.

The clearer the organization is about which tasks are billable and under what circumstances, the less confusion and billing disputes are seen. 

3. Individual billability

This reflects the unique contribution of each employee based on their skills, availability, and demand. Two consultants in the same role may have very different billability due to specialization, client engagement levels, or project mix. 

Example: A highly specialized developer working on a flagship client project may hit 90%+ billability,  while another might be between assignments and come in lower for that time period.

Individual billability gives insight into both performance and opportunity. When someone’s billability is lower than expected, it might be a sign of poor alignment, outdated skills, or unbalanced workflows, not necessarily underperformance.

Why project managers should care 

Tracking billability gives you insight into whether you’re staffed for success, billing appropriately, and making the best use of your team’s individual and collective skills. If you’re a PM or delivery lead, billability affects:

• Resource allocation - You need the right mix of people available to work on client projects.
• Scheduling - Under or overutilization can cause delivery problems.
• Profitability - Billability is a leading indicator of project profit margin.
• Morale - Teams stretched too thin will feel burned out, and teams who are under-deployed will disengage.

Billability vs. utilization: Are they the same thing?

One of the biggest misconceptions I’ve seen in service organizations is that billability and utilization rate are interchangeable terms. They’re related, yes. but they’re not the same. See below:

Why does it matter? Because you can have high utilization but low billability when someone is overloaded with internal tasks or project coordination work. 

And you can have high billability but still have room for efficiency gains, especially if time is poorly scoped or tasks run longer than they should.

Why is billability a strategic metric?

1. It’s your primary revenue engine

In professional services, we don’t sell widgets or subscriptions. Our product is people’s time, expertise, and problem-solving ability. If we aren’t converting enough of that into billable work, we’re losing revenue.

2. It drives resource planning

Understanding billability trends helps us answer questions like:

• Do we have enough demand for our current team size?
• Are we over-relying on one department or role?
• Is our pipeline aligned with current staff skills?

3. Smarter forecasting

PMs use billability data to create workload forecasts and flag capacity risks. If the marketing strategy shifts to a new industry and our people don’t have the right expertise, you know billability will drop unless you plan cross-training.

4. It can help prevent burnout

Yes, high billability sounds great, until it leads to exhaustion. Targeting 100% billability may look impressive on paper, but it’s unsustainable. Remember that your team consists of human beings who need an adequate margin for admin, learning, internal collaboration, and even just thinking time. A well-run team has healthy, sustainable billability, not maxed-out spreadsheets and demoralized employees.

How to calculate billability

The formula for billability is:

(Billable Hours ÷ Available Hours) x 100

Let’s take a practical example: A designer works 40 hours per week. Of that, 30 hours are spent on client projects. The billability rate = (30 ÷ 40) x 100 = 75%

That means 75% of this designer’s time is generating revenue. Over a month or quarter, tracking this gives us trend data to act on and it helps us compare across teams, locations, or roles.

TIP: Just make sure “available hours” reflects actual working capacity not theoretical capacity. This is why capacity planning tools are important to help you keep track. They’re included in PSA software like PSOhub and BigTime. 

What’s a good billability target?

You need to set realistic targets for billability that won’t negatively impact morale. For example, setting a 90% billability target for a team lead who also manages three direct reports and runs weekly retros is a recipe for burnout or corner-cutting.

There’s no single benchmark, but here are some helpful ranges:

• Consultants, creatives, developers, client-facing roles: 75–90%
• Managers and team leads: 60–80%
• Senior leadership (with strategic/internal focus): 50–70%
• Internal roles (HR, Finance, Ops): Typically 0% direct billability, though utilization should still be measured

8 strategies to effectively manage billability

1. Clarify exactly what counts as billable and be consistent.

If different teams have different interpretations of what counts as billable, reporting will do nothing for you. Define billable hours clearly in your time-tracking system, so that it’s easy for your team to track time toward the right tasks. Show everyone exactly how to do this during onboarding and planning meetings.

2. Set role-specific targets.

Avoid blanket billability goals, and instead, think about your billability expectations in terms of role, ability, and seniority. I.e. a junior UX designer learning the ropes won’t and shouldn’t be held to the same standard as a mid-career architect on a big project. 

3. Use technology to track time efficiently.

Manual timesheets lead to gaps, guesswork, and frustration. Good time-tracking software helps employees log hours quickly, flag billable vs. non-billable activities, and sync with your invoicing or resource planning tools. Nowadays, this can even be done with AI, so the entire process gets automated. Learn more about self-driving time tracking here. 

4. Audit your non-billable time.

Is your team spending an ungodly amount of hours per week in meetings? Are reports getting reworked three times before they go out? Are people duplicating work across systems? These hidden inefficiencies can eat away at billable potential, so don’t forget to periodically audit non-billable time. 

5. Use bench time strategically.

Every firm has periods when demand dips, and that bench time should be looked at like an investment, not a waste. Use it for cross-training into high-demand areas, continuous learning, internal innovation projects, and preparing reusable frameworks or templates. This not only increases future billability but also boosts morale and retention.

6. Encourage multi-skilling and continuous learning. 

The more versatile your people are, the more adaptable your workforce becomes. A marketing consultant who can pivot into light analytics or content creation is far more deployable and billable than one with a narrow scope. Fostering an environment of continuous learning that drives multi-skilling benefits everything, including the bottom line. 

7. Be mindful of overutilization.

It’s tempting to ride a highly billable team member hard, but it’s short-sighted. Fatigue leads to mistakes, rework, and disengagement. Make sure high billability doesn’t turn into hidden burnout by balancing workloads accordingly. 

8. Use capacity planning software.

If you’re trying to manage billability via spreadsheets and status calls, it’s time for an upgrade. Modern capacity planning software, usually part of a larger PSA or project management platform like PSOhub, helps you visualize real-time utilization, capacity gaps, and project demands, all while making billability data accessible to both PMs and leadership.

How AI tools are redefining billability

The rise of AI is reshaping how professional services firms think about billability. Tools like ChatGPT, GitHub Copilot, and AI-powered design platforms are reducing the time needed for many core tasks in marketing, software development, IT services, and consulting.

This creates a paradox because tasks that once took hours now take minutes, but the value to the client hasn’t necessarily changed. If firms continue to bill purely based on hours worked, they may see shrinking margins, even as productivity improves.

As a result, project managers must rethink what counts as billable. Time spent reviewing AI outputs, training models, or refining prompts can consume real effort, even if it's not directly billable in traditional systems. 

At the end of the day. firms may need to adapt by revising their billing models, shifting toward deliverable-based or value-based pricing.

At the same time, AI helps more roles to contribute to client work. A junior analyst with strong AI fluency can suddenly deliver outputs that used to require senior input. This can raise billability across the team, if supported by the right workflows and oversight.

AI challenges the old assumption that time equals value. It rewards teams that design smarter delivery models where speed, quality, and creativity are amplified, not just effort. PMs must update their tracking, tooling, and pricing strategies to adapt accordingly to this new reality.

What to avoid

• Chasing 100% billability across the board: Unrealistic and frankly, unhealthy.
• Measuring without context: Low billability isn’t always bad; sometimes it's part of a planned transition, training period, or innovation sprint. Context matters.
• Inconsistent definitions: Clarify and standardize what counts as billable across the organization. Stick to it. 
• Treating time tracking as surveillance: Frame it as a performance tool, not a punishment. Time tracking should help identify process improvements, not create fear.

Questions to ask for your next billability introspective:

• Do our current billability goals reflect the reality of each role?
• Where are we seeing consistent underutilization, and why?
• Are we enabling our team to become more cross-functional or siloed?
• What tools are helping or hindering our ability to track and act on billability?
• How are we protecting against burnout in highly billable roles?

In Sum: Track billability for more strategic alignment

From the lens of project management, billability essentially reflects levels of alignment: aligning people’s work with company goals, aligning resource availability with client needs, and aligning time investment with value creation.

The easiest way to track billability is to use PSA software like PSOhub that features a capacity planning tool and AI Copilot. Try PSOhub for FREE today!