Billable vs. Actual & Delivery Hours: Understanding & Closing the Gap

Does hard work automatically suggest hard cash? If you ask us at Memtime, the answer is, unfortunately, no. And it’s all because of the difference between actual and billable hours.

Let me ask you this: have you ever wondered where all those beautifully productive hours your team pours into client projects mysteriously vanish? They are like black socks in a dryer, disappearing without a trace, and you can’t seem to figure out how hours worked and billed differ so much.

This article will help you understand the invisible gap between the hours your team thinks they’re working and the hours that actually end up on the invoice. It will show you, once and for all, that being busy doesn’t always mean being profitable.

You can use this guide to spot the leaks, tighten up delivery hours, and finally start seeing numbers that don’t make you want to scream into a pillow, so let’s get to it.

No more chit-chat; we have missing hours to find.

What’s the difference between billable, actual, and delivery hours?

As someone who runs a service business, you know time isn’t just money; it’s everything.

So, starting strong, you need to know the difference between these terms. Here’s the breakdown:

• Billable hours are the golden hours; they are the ones you invoice to the client. These hours represent the value your business gets paid for and should reflect your team’s work.
• Actual hours are the full, raw count of time your team spends on a project, including all the briefings, meetings, revisions, extra brainstorming sessions, late-night finishing touches, etc. These hours show the reality of the work, not just the portion you plan to charge for.
• Delivery hours are the hours it should take to complete the project; it’s your scoped, budgeted, and promised time.

Now, let’s hang on for a second and keep the focus on delivery hours.

Why are these so important?

Because they directly affect your profitability.

Don’t believe me?

Check out our 30% method course.

This free course, led by Niclas Preisner, our CMO, helps you understand how delivery hours connect to profitability and why time tracking matters. He also explains how you can achieve a 30% net profit in your business by optimizing just 3 metrics:

• You get to create an action plan to measure and improve profitability.
• You learn how to define clear metrics and benchmarks to achieve 30% net profit.
• You can make a checklist you can use for process improvement.
• There’s a template and a guide on how to do profitability reporting as a team.

The course is over an hour long, but you don’t have to watch it all at once; you can just go through the chapters that mention delivery hours.

Speaking of delivery hours, here’s how they affect profitability (you can find all this information in the course):

• If you want to increase profitability, you need to increase the delivery margin.
• To optimize delivery margin, you need to work on average cost per hour, average gross income per hour, and utilization.
• The three previously mentioned metrics all rely on delivery hours.

In short, if you’re not tracking delivery hours accurately, you’re not tracking your profitability.

Why does knowing the difference between these three terms matter?

Well, because your company’s profitability depends on it.

At first glance, a few missing (or miscounted) hours here and there might not seem like a big deal. But over time, inaccurate time data becomes a weak link in your business: it’s draining profitability, thinning your margins, and putting pressure on your team.

Here’s what inaccurate time data leads to:

1. Hidden costs (that just keep stacking up). When time tracking is incomplete or inaccurate, you have no clarity on the effort behind your services. You get no chance to quote projects properly, and you miss opportunities to optimize processes. These small misses can seem insignificant, but when those misses are across projects, you lose thousands in revenue.
2. Lower profitability. When there’s a gap between actual hours worked and hours billed, you realize that projects that once looked profitable are nothing but break-even. Without visibility into how much time is spent versus what was budgeted, you can’t ensure your company’s financial health.
3. Margins get thinner. When extra work isn’t captured and billed, your margins disappear. It happens so slowly and sneaky: a little scope creep here, five extra revision rounds there, and a client call that somehow turns into a 2-hour therapy session. Before you know it, you deliver double the work for half the profit.‍
4. Poor team well-being. When projects demand more time than planned and that time isn’t acknowledged OR billed, your team can feel it. They are overworked, under-recognized, resentful, and probably planning to leave your company ASAP. Plus, if you don’t have accurate time data, it’s easy to misinterpret performance issues when the real problem is unrealistic scoping and/or untracked extra work.

How to define “good” time data & delivery hours

According to Niclas, “good” time data is data that is:

1. Complete, meaning that every employee involved in the project tracks time.
2. Up-to-date, meaning that time is logged the same day. Not a day after. Or week. Or a month.
3. Accurate, meaning the data reflects real work hours as closely as possible

Knowing that, if you want to ensure the accuracy of your team’s current delivery hours, you need to go through the previously mentioned criteria:

• First, check if all team members involved in the project are tracking their hours. Don’t forget to check executives and project managers; often, leadership roles log time inconsistently (or not at all), even though their contributions are essential to project costs.
• Second, in your project management software, check how many employees are tracking their time the same day, how many do it every 2-3 days or even once a week.
• And third, think about time data accuracy. Such accuracy heavily depends on when time is logged; the more time passes, the less is remembered.

So, if you want to trust your delivery hour data, you need full participation, same-day logging, and real accuracy, not best guesses.

How to track delivery hours & improve their accuracy

Getting serious about tracking delivery hours isn’t about adding more timesheets, more rules, or meetings to keep everyone in the loop. It’s about making time tracking fast and—if you ask us—more automatic.

Here’s how you can do it, step by step.

#1 Set clear expectations for delivery hours

When introducing time tracking, your first step is clearly defining “delivery work”.

Delivery work can include final outputs like copy, design, and code, but it’s also any activity that directly contributes to the completion of a project.

In this step, you must be specific so your team knows what is expected of them; when there’s no ambiguity, there’s no misunderstanding. Here’s how you can achieve clarity when it comes to delivery work and hours:

• First, define which activities should be tracked. Include meetings, brainstorming sessions, emails and client communication, strategy discussions, admin tasks, project management, and revisions. All these activities are necessary to get the work delivered or finalized, so they count and they should be logged.
• Then, communicate why time tracking matters. Time tracking is not about micromanaging; you’re doing it to protect margins, and balance workloads, define project scopes and accurate budgets. View time tracking as a tool that protects project profitability, not a hammer that destroys your team’s motivation and dedication.

When your team understands that time tracking is about sustainable profitability and prosperity, they’ll be far more likely to embrace the process.

#2 Say “goodbye” to manual time tracking

Manual time tracking is *bad*. It’s slow, inaccurate, and easy to forget. And when people guess their work hours, it leads to inaccurate time data.

Our suggestion?

Switch to an automatic time tracking tool like Memtime. It’s our desktop app that quietly records activities in the background, creating a (private!) timeline of apps, documents, meetings, and tasks throughout the day.

Your team will be able to review their timelines and activities, log activities from the timelines as time entries, and export their hours to a project management tool. No more lost minutes or hours.

As a Memtime user, all you need to do is turn on your computer, start working on tasks and the tool will capture them all for you.

Here are some of the Memtime features worth noting:

• Memtime tracks your activity in the background, displaying the program name, details, and the time you spent using it.
• It arranges all your captured activities in a timeline, the Memory Aid.

• If you want to visualize how your day went, you can zoom in and out and see your work in 1-60 minute intervals.
• You decide which activities to log as time entries. You can then assign them to projects and tasks in your project management software.
• Memtime integrates with 100+ tools via a two-way sync: you can import projects (and tasks) into Memtime and then export time entries back to those projects and software.
• Your data is visible ONLY to you and stored locally offline on your computer.

You can create a Memtime account in less than 10 seconds (with just your name, no credit card info needed) so you can download and install the app.

But Memtime isn’t just a personal time tracking app. When used cross-team, it allows your employees to work more efficiently and stay transparent when it comes to time management.

That’s why I suggest trying our 2-week free trial to see how you like Memtime. If you end up being satisfied with it, schedule a call with our team. Our team will show you all app’s features and explain how you can introduce time tracking to your company to ensure maximum adoption.

#3 Track all project-related activities

As mentioned before, delivery hours include all project activities, including meetings, client calls, Slack messages and emails, strategy, research, prep time, QA, revisions, etc.

And sure, you can’t track only design or coding hours, skipping everything in between, but if you do so, you underestimate the actual delivery cost and sabotage your profitability

Luckily for you and your team, Memtime captures all computer activities. Even when your team switches contexts a dozen times a day.

#4 Compare delivery estimates and actual work

Once your time tracking app is all set and your team has worked on a few client projects while using the app, you can compare what you estimated for delivery hours vs. what was actually spent.

Whatever patterns you spot, use these insights for future project planning to improve scope accuracy and protect your profit margins.

#5 Make reviewing time data a habit

Time data isn’t something that should be left alone or sit in your team members’ timelines or project management tools. Such data can be a goldmine of insights if you consult it regularly.

So, make a habit of reviewing time data so you can make smarter decisions for future work. 

Here’s when you should review time data:

• During project retrospectives. Use time tracking data to check where your estimates were accurate and where they fell short. Let the data guide a conversation about what went well, what needs adjusting, and how you can plan better next time.
• In 1:1s with team members. Time data can reveal if your team members are consistently overloaded, stuck in time-consuming tasks (that should have been delegated), or have no problem delivering complex work efficiently. In 1:1 meetings, use time data to discuss workload balance, skill development opportunities, and process improvements.

• When quoting new projects. Historical time data is the foundation for building more accurate quotes and timelines. You can simply reference real numbers from similar past projects to boost your confidence when pitching to clients and set more realistic expectations internally (reducing the chance for scope creep).

#6 Build a culture that relies on time tracking

Time tracking works if it comes naturally, as a regular part of your team’s workflow, not if it’s an inconvenience or an afterthought.

If you want to build a culture that embraces time tracking, you need to encourage your team to review and finalize their logged hours daily, not at the end of the week.

Why daily? Because that’s how you get real-time (or near real-time) tracking.

And with such tracking also comes:

Tools like Memtime make this step easy with a daily timeline format. Instead of wasting time reconstructing their week, your team members can quickly review their activities, with no paperwork or admin tasks.

Wrapping up

That’s it. That’s the world of billable vs. actual delivery hours.

By paying attention to your delivery hours and embracing tools like Memtime, you’re finding missing hours, missing profits, sanity, and maybe even a few smiles from your overworked team.

Now go forth, track wisely, and may your hours always be billable and your margins thicc. 💰