Have you ever heard the word billable used in the trades and wondered what billable meant? Whether you are new to the trades sector in the UK, or an old hand seeking to sharpen up your grasp of project profitability and costs, there is just one place to start when it comes to making sense of what you are being billed: Billable. In short, it is all about finding out what you can sell to your clients. This step-by-step, easy-to-understand manual will slice up the billable meaning in the trades industry, illustrate it with straight-to-the-point examples and deliver some actionable tips to enhance your project management, increasing your bottom line.
What Does Billable Mean: A Look at the Core
Essentially, what is meant by billable is any time, materials, services or costs that we can directly bill to a client on their behalf. When a cost is billable then this is an activity that goes towards the final invoice to the customer.
Consider: you perform a job to a client and you spend or do something that is directly related to doing the job that the client is expecting you to spend on or be reimbursed by the client, then it is billable.
The Billable Spectrum: What Can Be Billed?
In the trades, the scope of what can be billable is quite broad and typically includes:
1. Billable Labor/ Hours
This is probably the most widespread and the most important billable item. It is the number of hours that your team (or yourself) actively works on a project of a given client. This includes:
- On-site job: time actually present at the clients premises doing the job (e.g plumbing work, electrical works, carpentry, painting).
- Travel time (usually): This will be charged when you are going to and coming back to the client site depending on your agreement and industry standards you can be charged even of you go beyond a given radius.
- Planning and preparation: In other instances, certain time may be spent on specially designing, or planning or other detailed preparation, directly on a project of a specific client, which may be billable subject to prior agreement.
- Supervision: Time spent by a supervisor or foreman directly overseeing work on a specific client project.
Example: A plumber spends 4 hours at a client’s house fixing a leaky pipe. Those 4 hours are billable hours. If their agreed-upon hourly rate is £50, then £200 of the invoice comes from labor.
2. Billable Materials
Billable materials are any tangible objects, parts or resources utilised to carry out the project of the client. This is normally billed out to cost, or slightly marked-up to allow products to be paid the handling and purchases.
- Component and parts: Pipes, wires, fittings, timber, tiles, paint, screws, etc.
- Specialty items: items to be ordered and delivered to build the project, but with some special requirements (not cargo).
- Consumables: There may be consumables depending on the level of scale, e.g. Sandpaper, cutting discs or some specific adhesives (though only where important to the job).
Example: In leaky pipe fix, the plumber will utilise new piece of pipe, a coupling and some PTFE tape. All these materials are charged in the bill.
3. Services
Beyond direct labor and materials, some specialised services or additional work can also be billable.
- Equipment rental: If a specific piece of equipment (e.g., a mini-digger, scaffolding) is rented specifically for a client’s project, the rental cost can be passed on.
- Subcontracted work: If you hire another trade (e.g., an electrician for a plumbing job that requires electrical disconnections) for a client’s project, their charges become part of your billable services.
- Waste disposal: The cost of responsibly disposing of waste generated from the project.
- Permits and fees: Any permits or regulatory fees required for the work, paid on behalf of the client.
Example: An electrician needs to hire a specialist lifting platform to access high-level wiring. The cost of renting this platform for the duration of the work is a billable service.
4. Expenses
These are typically out-of-pocket costs incurred while performing the work that can be charged back to the client.
- Mileage/Fuel: For extensive travel, especially to remote locations.
- Accommodation/Subsistence: If a project requires an overnight stay away from home.
- Specialised training/certification costs (rare but possible): In very niche situations where a specific, client-requested skill requires immediate, dedicated training.
Example: A builder travels 100 miles round trip to a client’s remote site. The fuel cost or a pre-agreed mileage rate can be added as a billable expense.
The Crucial Distinction: Billable vs. Non-Billable
Understanding what isn’t billable is just as important as knowing what is. Non-billable time and expenses are costs that your business incurs but cannot directly charge back to a client. These are part of your overhead and need to be factored into your pricing strategy, but they won’t appear as specific line items on a client’s invoice.
Common non-billable items include:
- Administrative tasks: Invoicing, quoting, general office work, answering routine phone calls, marketing, website maintenance.
- Marketing and advertising: Costs associated with promoting your business.
- Idle time: Time spent between jobs, waiting for materials to arrive, or during unforeseen project delays not caused by the client.
- Business development: Attending networking events, preparing general proposals that don’t lead to a specific project.
- Training and professional development: General courses or workshops to improve skills, not specific to a current client’s immediate need.
- Equipment maintenance and repair: Keeping your tools and vehicles in good working order.
- Unprofitable travel: Commuting to and from your workshop, or short, routine travel that’s part of your standard operating costs.
What is the significance of the distinction?
The awareness of the distinction would enable you to price your services correctly, control your profits and present clear invoices to your customers. Without knowing, you may easily incorporate non-billable expenditures in your billing entries and that will probably end up creating a situation where you overcharge your clients and lose the trust of customers. On the other hand, not having an account of what can be billed translates to leaving cash on the table.
Practical, Actionable Advice for Trades Professionals
Now that you understand what does billable mean, here’s how to apply this knowledge effectively in your day-to-day operations:
1. Be Open and upfront
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Detailed Quotes: It is important to make quotes in details and itemised; labour, materials and any other additional charges and services that are billable should be distinctly drawn apart.
- Terms and Conditions: Have clear terms and conditions that specify what is billable (e.g., travel time, specific material markups). Get these agreed upon by the client before starting work.
- Communication is Key: Just in case any unforeseen billable expenses arise in the course of a project (e.g., you find out additional work you must do, an unexpected significant increase in material prices), communicate with the client right away to ask them to agree before you continue.
2. Track Everything Meticulously
- Expense Logs: Maintain a log of any billable expenses, including mileage, parking fees, or specific equipment rentals.
- Time Tracking: Implement a robust system for tracking labor hours. This could be a simple spreadsheet, a dedicated app (e.g., QuickBooks Time, TSheets), or even just detailed notes in a diary. Track start and end times for specific tasks.
- Material Receipts: Keep all receipts for materials purchased for a client’s job. Organise them efficiently.
3. Accurately Price Your Billable Items
- Package Deals: For larger projects, consider offering fixed-price quotes based on an estimation of all billable components, but still track internally to ensure profitability.
- Hourly Rates: Calculate your hourly rates to ensure they cover your overheads (including non-billable time) and provide a healthy profit margin.
- Material Markups: Decide on a consistent and fair markup for materials. This covers your time in sourcing, transporting and managing the materials.
4. Educate Your Clients (Subtly)
- Explain your invoicing structure clearly. Help them understand why certain items are charged.
- For example, when discussing a quote, you might say, “This quote includes X hours of labor, Y materials and Z for waste disposal, all of which are directly related to getting your new kitchen installed.”
5. Leverage Technology
- Accounting/invoicing Software: You should consider make use of the accounting software or invoicing software (e.g., Xero, Sage, QuickBooks) that you can use effortlessly to generate itemised invoices, monitor the payments received and connect with time tracking software.
- Project Management Applications: There are apps available that help manage individual projects where you are able to log time and materials directly to the respective project speeding up the billing process.
When it comes to understanding the concept of billable, it is not only a matter of billing the clients but of operating an efficient, clear and sustainable trades business within the UK. Knowing what billable meaning is and closely monitoring the time and money you spend on your work while making your clients aware of what is going on are the ways to ensure that your efforts are rewarded. Such transparency builds confidence among your clients and provides firm grounds in terms of long-term survival in trades business, as a dynamic market involves.
Implement the practices now and see your business achieved!