Say you're doing contract development work that is accounted for and billed on an hourly basis. There has been no design work done/provided up front, and the project involves a number of problems that require a non-trivial solution. Time spent designing, researching, and implementing solutions to such problems would be billable.

However, a lot of design and problem solving tends to happen "in the background", when doing things that are completely unrelated to the project itself. For instance, it's not uncommon to come up with a solution to a problem while showering, or eating dinner. And time spent mentally planning out an approach while drifting off to sleep at night can significant cut down on the amount of coding time/trial and error required the next day. And so on.

So how is the time spent on such "background tasks" generally accounted for? If those things were done while sitting at a desk and focused on the project, they'd definitely be billable. Do they become less billable or non-billable by virtue of having been done outside of a working context? If so, how do you compensate for the fact that you're basically providing effort/value for free in that case? By charging a higher hourly rate?

And if not, how do you compensate for the fact that if you did the same task in the "foreground" it may have taken slightly less time than doing it in the background?

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    This is why some consultants bill by the day/week instead of the hour. – daaxix Jun 8 '14 at 4:25
  • Or quote by the job rather than by hours. – keshlam Jun 8 '14 at 4:37
  • Don't bother. This is the way the human mind works. Why would want to make taking a shower billable? – user8036 Jan 10 '15 at 11:55

In my first full-time job, I worked for a startup that became within five years the largest environmental planning firm in the New York Metro area. Should I be proud to say that I wrote all of my firm's engineering calculations and buried those hours in the billable time that we charged the client? The client was none the wiser because none of the total engineering invoices were out of line with what the client was expecting had I done the work manually. The payoff would start appearing in the next project as I trained the staff to use the software I had written and we were billing a fixed cost that would have been quite reasonable had we done these engineering calculations either manually or through spreadsheets.

I told my management point-blank that if an idea came to me while I was reading the comics in the bathroom, the time I spent in the bathroom was billable time. Regrettably, my management was prudent enough to just bill for the time and not volunteer to the client how and where we got some of these ideas that allowed us to meet those deadlines that our competitors had declared as impossible to meet :)

If you account for your time in an overly detailed way, you will just cheat yourself of the time you spent researching a solution for the client - research that might save the client time and money. The time you spend doing research and working out a cost-effective resolution methodology should be billable to the client. I used to split my R&D time between various clients.

You could also charge a higher hourly rate but be careful to keep the hourly rate competitive. You could charge more hours but be careful to keep the number of these hours within the client's realm of expectation. You should charge whatever combination of hourly rates and billable hours would be consistent with making solidly good money while remaining competitive. And please don't go overboard with excruciatingly detailed accounting of your billing hours. If a client required an excruciatingly detailed billing from me, I made damn sure that I billed that client for every minute I spent composing my billing to client, too. When it came to billing, I was not a nice guy. Because the last thing I wanted to do was stick my firm with any costs of my overhead. But even with my lousy attitude, I regret to say that I rarely ever managed to bill for every hour that I had actually worked.

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