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:
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:
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.
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.
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.
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:
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:
|
Aspect |
Billability |
Utilization |
|
Definition |
% of available hours that are billable |
% of available hours spent working |
|
Focus |
Revenue generation |
Time efficiency and capacity usage |
|
Includes |
Only revenue-generating tasks |
Billable + non-billable activities |
|
Example |
Time spent on client work |
Time spent on client work and internal meetings, admin |
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.
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.
Understanding billability trends helps us answer questions like:
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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!