How to Use Billable Forecasting to Improve Your Resource Management

In our last blog post on resource forecasting, we provided an overview of the importance of this process and tips on how to get started.

In this article, we will build on those concepts and help you take your resource forecasting process to the next level with “Billable Forecasting”.

What is Billable Forecasting?

Resource forecasting is about predicting the future workload of your team. It answers questions like “How busy are we going to be?” and “Do we have the right resources to handle the work coming at us?”

Billable forecasting builds on this and answers similar questions but with a more specific focus on “billable” work: “How busy are we going to be with billable work?” and “Do we have the right resources to handle the billable work coming at us?”

Why Does It Matter?

1) Revenue and Customer Experience Are Top Priorities

Not all work is created equal – some projects are of higher priority because they are revenue-generating or have a measurable customer impact. While your team may appear overloaded when considering all work, focusing on just billable work may reveal a different picture.

Internal initiatives are important, but it's also important to dissect resource allocation meaningfully to make decisions when billable priorities are at risk.

2) Billable Forecasting = Revenue Forecasting

In many organizations, billable forecasting can help predict future revenue when there is a direct correlation between billable tasks and a bill rate. With a sound billable forecasting process, you can answer questions like “How much revenue can we expect to drive in the coming time period?”

3) You Get What You Measure

Measurements drive behavior. As noted in the Harvard Business Review:

Human beings adjust behavior based on the metrics they’re held against. Anything you measure will impel a person to optimize his score on that metric. What you measure is what you’ll get. Period.

If you focus on billable utilization as an important measure in team meetings and company reporting, your teams will devote more effort to uncovering and delivering that kind of work.

How Do You Do It?

Several resource forecasting methods apply to billable forecasting, with some additional considerations:

1. 1.

   Define “billable” for your organization. The first step is to create a clear definition of what “billable” means in your project management organization. Billable work does not always equate to direct revenue. For professional services, “billable” may mean time and materials billing; for onboarding or customer success teams, any customer-facing time may be considered “billable” even if it doesn't directly generate revenue.

2. 2.

   Assign the billable attribute to projects and tasks. With a clear definition, assign this attribute so you can differentiate between billable and non-billable work. Put controls in place to ensure accuracy when creating projects from templates or adding tasks ad-hoc.

3. 3.

   Assign a dollar amount if revenue forecasting is desired. Specify a billable rate for resources or tasks to report on expected revenue over time. The more precise your approach, the more accurate your reporting and the greater your potential to automate billing processes.

4. 4.

   Define resource utilization targets at both total and billable levels. For example, expect 40 hours of total time logged per week, with 70% billable. This gives resources a clear measure of billable dedication and a personal stake in achieving the target, while leaving time for internal or independent work.

5. 5.

   Maintain a healthy balance. Find a way to balance billable and interesting non-billable work. Billable forecasting can improve performance, but billing time is not the only thing that matters. People come first, so apply billable forecast management in a way that motivates impactful performance without causing burnout and turnover.