Check out time.onrails.org for project tracking and blinksale.com for billing. These two sites are Free to sign-up and has real nice functionality and integration for client time tracking and billing.

time.onrails.org... Great for separating projects and running a simple punch clock which you can export out or link data to blinksale.com.

blinksale.com... has just those features you are looking for plus the ability to adjust and customize for both product and service billing.

BTW: I wouldn't suggest it for large scale of clients or complex projects for the obvious reasons although I am sure you can and other do.

The best part is its FREE! Anyways, check it out... enjoy.