How do you calculate billable hours in consulting?

Then, in the “task description” column, describe the job you worked on. Next, calculate the billable hours by multiplying the total hours by your hourly rate to calculate the billable hours for each task. The consultant will track billable hours as a percentage of the total working hours the consultant could have billed. For example, a consultant may have 77% of billable hours, 88% of billable hours, or even more than 100% of billable hours.

Professional services firms with consulting divisions that use the billable hours model are not inherently more focused on profits than McKinsey or BCG. It will do everything it can to increase its billable hours, even if that hurts the company in the medium and long term. If you work for a company that forces you to focus on billable hours, such as Deloitte and PwC, you can't stop doing it. In many industries, companies charge their customers every hour for the services they provide.

For example, let's think of a consultant who knows very well that his salary depends on the number of hours he spends (number of billable hours or uniutilization). They believe that, since the consulting branches of companies such as Deloitte and PwC use a billable hours model and companies like McKinsey and BCG do not, Deloitte and PwC place some emphasis on profitability. For example, a junior consultant may try to influence the length of the contract to achieve more billable hours, and their interactions with the customer can be detrimental to the company. These are the main reasons why keeping track of non-billable hours is important for your company and your customers.

Second, billable hours can only work if younger consultants are not forced to work, increasing their utilization at the expense of their professional development. Another reason why the billable hours model is a bad idea for management consulting is that it places junior consultants in an unfair situation. If consultants working on a project work billable hours at a client's expense, you'll only know that the work is bad if the client complains. Many believe that the billable hours model is wrong for consulting because of its emphasis on cost-effectiveness.

Consultants will want to increase the time they spend in the office just to increase billable hours, and so they can be expected to increase their salary at the next performance evaluation.