This is the hub guide: the whole journey from logging your first billable hour to sending a finished invoice from Xero, in order, with links to the detail on each step. If you read one piece on billing time through Xero, read this one, then branch out where you need depth.
The short version
Connect Xero once. Track time against a client and project, and let the billable rate resolve automatically. Create an invoice from those entries, choosing how the lines are grouped. Hour Cap pushes it to Xero as a draft with the right tax and tracking categories. You review the draft, then authorise and send from Xero. Track, group, draft, review, send: nothing reaches a client without your sign-off.
Step 1: Connect Xero
On the Team plan or above, connect your Xero organisation from settings. The sync pulls in your contacts, sold items, tax rates, revenue accounts, branding themes and tracking categories. Contacts are matched to your clients by name, and any customers that only exist in Xero are created locally so you can bill them straight away. You do this once; OAuth tokens refresh automatically. For more on the connection itself, see how Hour Cap pushes time to Xero and the deeper Xero time tracking overview.
Step 2: Track billable hours
A billable hour is simply time you can charge a client for; if you want the precise definition, see the glossary entry on billable hours. Log time two ways:
- Timer: start it when you begin, stop when you finish. If a session crosses midnight, it auto-splits into per-day entries so each day's hours are recorded correctly.
- Manual entry: type the duration using formats like
1h30m,1:30,8h,30mor1.5.
Every entry carries a description, which becomes the detail your client sees on the invoice. Track against the right client and project so the rate and any tracking categories resolve correctly later.
Step 3: Let the billable rate resolve
You do not set a rate on every entry. The billable rate cascades in a clear order:
| Order | Rate source | Used when |
|---|---|---|
| 1 | Project rate | The project has its own rate set |
| 2 | Member rate | No project rate; the member has a rate |
| 3 | Organisation default | Neither project nor member rate is set |
If none of the three is set, the rate is zero, which is a signal to configure a rate before you bill. Not sure what to charge? Work it out with the agency rate calculator or, for solo work, the freelance rate calculator, and sanity-check what you actually earn per hour with the effective hourly rate calculator.
Step 4: Group the line items
When you create an invoice, you choose how the entries become lines, set per organisation:
- Per entry: one line per time entry, maximum detail (the default).
- Per project: one line per project.
- Per date: one line per day.
- Per member: one line per team member.
Descriptions are always preserved, and when entries are grouped they are joined with a semicolon so each line still reads as a record of the work. The full detail on this is in sending tracked time to Xero as draft invoices.
Step 5: Apply tax and tracking categories
The tax rates synced from Xero apply on push, so the invoice carries the correct GST or VAT for your region. The regional worked examples, including AU at 10 percent, UK at 20 percent and NZ at 15 percent, are in GST/VAT-ready invoicing from tracked time. Each line can also carry up to two Xero tracking categories, resolved across project, invoice and organisation levels, so your reporting holds up. That mechanism is explained in Xero tracking categories for time billing.
Step 6 (optional): Gate on approved time
If you want a review step before any hour can be billed, turn on timesheet approvals. Entries flow Unsubmitted, then Pending approval, then Approved or Rejected, lock once submitted, and only approved or no-approval-required entries are invoiceable. Unreviewed time can never reach a draft. See how to invoice only approved timesheets to Xero. Approvals are on the Business plan.
Step 7: Push to Xero as a draft and send
Create the invoice and Hour Cap queues it, then pushes it to Xero as a draft. It is never authorised or emailed automatically. In Xero you give it a final review: tax, totals, tracking categories, branding theme and wording. Then you authorise and send the way you always have.
The loop: track → group → draft → review → send. If a push fails, the invoice is marked failed with the stored error so you can retry. Void a draft and the entries are released to be invoiced again.
Retainers: the same flow on a schedule
If you bill a fixed block of hours, retainers handle it. A retainer belongs to a project and runs weekly, fortnightly, monthly, quarterly or over a custom number of days. It tracks hours used and remaining, days remaining and an alert threshold, and you can invoice a period to Xero, including past uninvoiced periods, using the same draft-and-review flow. See Xero retainer billing for the detail.
Watch the numbers behind the hours
Tracking and billing are only half the picture. Keep an eye on whether the work is profitable: your utilization rate tells you how much of your team's time is billable, and your realization rate tells you how much of what you bill you actually collect. Run the numbers with the billable utilisation calculator, the project profitability calculator and the agency profitability calculator.
Choosing your tool
If you are still deciding which add-on to use, the trade-offs across the main Xero time tracking apps are laid out in best Xero time tracking add-ons for agencies. For a direct comparison, see Hour Cap versus MinuteDock.
Get started
The Free plan covers single-user time tracking. To invoice through Xero and run retainers, you need the Team plan; timesheet approvals are on Business. See pricing to pick the tier that matches how you bill, then connect Xero and turn your hours into invoices you actually trust.