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How it is calculated
Take the hours a person or team spent on billable work in a period and divide by the hours worked in that period. Some firms divide by available hours instead, which excludes leave and holidays. The result is expressed as a percentage. The calculation works for one person, a team, or the whole firm, and the three answers are rarely the same because principals and support staff spend more time on non-billable work.
What "billable" means
"Billable" in this sense means chargeable to a client project. On an hourly phase those hours are invoiced directly. On a fixed-fee phase the hours are not invoiced hour by hour, but they are still project work. A firm should decide, and write down, whether fixed-fee hours count as billable for utilization. Counting them one way in January and another in July makes the trend meaningless.
Where the number misleads
- Late or missing time. A rate computed from timesheets filled in at month end reflects memory, not work.
- Different definitions. Comparing a rate that divides by available hours with one that divides by total hours is not comparing like with like.
- A high number is not automatically good. A team at the top of the range has no room for business development, training or a surprise.
- It is an effort measure, not a profit measure. It says nothing about whether the fees earned covered the cost of the time.
Six signs your practice has outgrown spreadsheets describes why guessing utilization stops working as a team grows, and why project numbers drift explains the limits of effort figures.
In Rizqo
Rizqo records time by project, phase and task and marks each entry billable or non-billable, with billability following the phase. The revenue and effort report shows billable and non-billable hours and can be filtered by team member, which is the raw material for a utilization figure. Rizqo does not offer capacity planning, availability tracking or a utilization dashboard. Architecture time tracking software covers how hours are logged.