Unleashing Profitability for Your Service Business With Time Tracking
As business owners and HR executives know, human capital is one of the biggest cost determiners in service-oriented businesses. Companies need simple, repeatable processes for allocating resources, compensating employees, and billing clients—all without significant investments in clerical labor. Time tracking software, of course, is the answer to these issues. Most companies know the value of their time tracking software for efficiency, but what many don’t know is how powerful it can be for boosting profitability. When used correctly, time tracking tools can support team management, project visibility, and efficiency across the board. This applies to both hourly and salaried teams in your organization. Some companies believe that salaried employees shouldn’t have to track time in the same way as hourly staff—but in reality, salaried employees are just as susceptible to time management inefficiencies as any other staff member. Effective time management tools shine light on these issues and help you root out other problems that may be eating away at your profitability.
Human capital is one of the biggest cost determiners in service-oriented businesses.
2
A Brief History of Time (Tracking) As the most basic method of exchanging work performed and time spent for payment, time tracking has existed in one form or another since humans created society. From the earliest days of the industrial revolution to the digital age, we’ve managed to streamline many of the processes surrounding time tracking. We don’t rely on punch clocks and paper any more. We utilize computers and other devices to record hours, we feed data into payroll software, and that software automates many of the tracking and reporting features that we take for granted today. The advent of smartphones has allowed for advances such as GPS and remote time tracking, allowing for more accurate and easier recording. Today, all the different sets of data gathered by these systems are used with endto-end solutions that integrate with accounting platforms such as QuickBooks Online (QBO) and T-Sheets.
Integrated solutions such as QBO, T-Sheets and ADP now make it easy to track time, bill clients and pay employees with minimal administrative overhead.
TIME SHEET
me: Employee Na
Address 1
me: Manager Na
e 2m ssa dreN Ady an Comp
SHEET TIME
Employ
Manag
er Nam
ss 2 Addre
P ate ZI City, St Phone Day
k of Wee
Wed 12 Th
3
9:05 AM
/11
9:05 AM
2 u 12/1
/1 Fri 12 Sa
es (minut
9:00 AM
3
Sun 12 Mon
45 45
m
Time In
Breaks ) es (minut
Time Out
Total
m [h]:m
0:00
32:00 r Regula [h]:m
8:00
m
ime Overt [h]:m
m
Sick
8:00
8:45
0:00
[h]:m
Fri 12/20
Breaks
Time In
(minutes)
0:00
Thu 12/19 Holiday m
8:00
8:45
32:0
Total
18 Wed 12/ 0:00
[h]:m
8:00
8:10
0:00
8:00
2:20
8:00
8:40
0:00
Tue 12/17
0:45
0:00
/17
6:30 PM
Mon 12/16
Day of Week
Total
45
Sun 12/15
0:00
12/16
6:30 PM
45
9:00 AM
Sat 12/14
0:45
8:00
0:00
eek
[h
]:mm
0:10
8:00
8:45
6:30 PM
m
Sick
0:40
8:00
8:45
6:30 PM
[h]:m
8:00
8:10
/15
Tue 12
[h]:m
m
8:40
5:45 PM
30
9:00 AM
4 t 12/1
[h]:m
6:00 PM
15
r Regula
Total
Time Out
Breaks )
Time In
ime Overt
[h]:mm
[h]:mm
5:45 PM
30
Regular
Total
Time Out 6:00 PM
15
9:05 AM Thu 12/12 cation Va m [h]:m Holiday 9:00 AM m [h]:m Fri 12/13
2019 12/11/
ng: Starti Week
ss 1 Addre
(minutes)
9:05 AM
Wed 12/11
e:
Breaks
Time In
Day of Week
e: ee Nam
12/11/2
g: Week Startin
ZIP City, State Phone
m
Sat 12/21 Sun 12/22 2/23
Regu
Total
[h]:mm
0:00 0:00
Vacatio [h]:m
Time Out
n
m
0:00 0:00 0:00 0:00
[h]:m
How Time Tracking Drives Profitability Is it really possible to operate a profitable business if you don’t know all the expenses? Time tracking allows managers and owners to keep track of the most expensive aspect of their business: labor. Understanding how employees spend their time will provide better insights and help to drive profitability. Managers who can see exactly where time is being wasted can implement new strategies and cut costs where it’s needed most. Most modern time tracking methods offer the ability to view real-time data, which allows business owners to see which employees are available for new projects and help them to better utilize their staff.
Time tracking allows managers and owners to keep track of the most expensive aspect of their business: labor.
4
MORE ACCURATE PRICING FOR FUTURE PROJECTS Time tracking software gives business owners deep insight into historical performance data that can be used to price out future work. Most quality time tracking solutions offer detailed breakdowns of job costing, service efficiency, and projects known to be problematic. Taken together, this data can help business owners better understand the costs inherent to each project—and how to structure pricing for future work in a way that’s profitable for the company yet still competitive in the marketplace.
MANAGE ACTUAL COSTS AGAINST BUDGET Time tracking reveals profitability on a per project/per client basis by helping you measure what you expect to be delivered versus what’s actually delivered. Scope creep can occur in any project, and without a structured system for measuring service volume, it often goes unnoticed until it’s too late to course correct. Time tracking workflows give account managers control over this information and gives them the means to forecast these issues before they occur. And should these issues arise, managers can work towards renegotiating contracts with a more realistic service volume scope.
EASIER CLIENT BILLING By providing a more accurate way to track costs, time tracking can also help with client billing. The ability to track labor costs down to the dollar without any estimations or guesses allows you to figure out the exact cost of projects. Using that data, you can come up with more accurate pricing for your customers, while ensuring the profitability of your services. That might even allow for lower prices to undercut competitors and increase your market share. On the front side, a better understanding of project costs will help you to provide more accurate estimates for your clients. Then, when the invoice is delivered, your clients can see the exact breakdown of labor costs for a more transparent transaction, which is always appreciated. Time tracking can lead to stronger, longer-lasting, and more profitable client relationships.
5
MOBILE WORKFORCE MANAGEMENT Only 25% of employers use a mobile app for time tracking. If your company utilizes a remote team, time tracking with a mobile app can help with mobile workforce management. New technology allows employers to use GPS to show the location of team members while they’re on the clock. If a project becomes available, you can dispatch the closest team and get the job done more quickly. Not only will it increase efficiency and cut costs, but it will also help to keep clients satisfied with better response times. GPS time tracking can also help you see where your employees are spending time. Are they taking two-hour lunches? Or maybe they went home to catch an episode of their favorite TV show during the workday. Time tracking can grant you the ability to see exactly where your employees are while they’re on the clock. Employees will be held accountable for how long and where they are spending their workday.
TRACK YOUR LABOR VALUE MULTIPLE Your labor value multiple (LVM) metric is an important measure of profitability, indicating the value delivered by an employee or team compared against the cost of employing that team. It’s a basic measure of revenue output against wages, but it’s a crucial part of determining long-term profitability. LVM applied across an organization gives business owners a top-down view of worker productivity and how to balance staffing costs with service pricing. As such, it’s to every business owner’s benefit to keep tabs on this ongoing metric, a process that begins with an accurate time tracking tool.
6
ADMINISTRATIVE EFFICIENCY One of the most difficult and tedious tasks for any employer is payroll. Not only does it take up a lot of time, but it opens the opportunity for human error. A whopping 80% of employee time sheets have to be corrected. When dealing with your employees’ and company’s money, errors are not acceptable. Interfacing GPS-based time tracking solutions with existing systems can help to streamline employee management. Time tracking software can be integrated directly into your existing payroll software to increase accuracy, save time, and eliminate time theft, which costs U.S. businesses $11 billion annually. It can also be linked to the general ledger to improve billing accuracy and reduce employee time spent invoicing. Less time and fewer mistakes mean more profit! By using automated time tracking systems, businesses can save 6% on payroll costs. Utilizing mobile workforce management software creates a seamless process from start to finish—one that collects and compiles all data pertinent to labor costs using minimal time and energy. Since most of the processes are automated, senior staff can spend more of their time analyzing employee
7
utilization and less time entering data and tracking labor costs, which will lead to better ideas and more profitable management of the business. The best part: integrated systems can be accessed remotely from anywhere with an internet connection. If you need to check on your employees from a trade show on the other end of the country, you can. Whether you’re on vacation or simply out of the office, you will have complete access to your business’s labor utilization, which will allow for more informed decisions on the go. Most time tracking software can even be accessed right from your cell phone. Of course, having access to this data is only the beginning. You’ll need to include this information in your chart of accounts, taking care to include the loaded costs of your service delivery department: payroll taxes, employee benefits, training costs, and any other overhead that might be relevant. Simply assessing the flat rate of each employee’s salary isn’t enough; a true cost/benefit analysis here requires a full accounting of these ancillary costs as they pertain to service delivery.
How to Motivate Employees to Track Time Actively disengaged employees cost businesses $450 billion in lost productivity every year. Successful business leaders look for ways to recapture that lost productivity, and time tracking is a common answer. Small to medium businesses can struggle when implementing time tracking technology. It’s much easier to engage employees through time tracking solutions when you effectively communicate your goals and make time tracking easy. Here’s how you can motivate employees to track time and enjoy doing it.
ESTABLISH CLEAR GOALS FOR TIME TRACKING AND BE HONEST ABOUT INTENTIONS It’s your job to clearly communicate time tracking goals and explain why it’s important while also demystifying any concerns. Believe it or not, most employees want their company to succeed. They’re more inclined to help the company do that when you’re honest about goals and intentions. Productive time tracking goals often include the following: •
Keeping projects on track – Let employees know that every one of them directly contributes to delivering a project within budget when they track their time.
•
Providing accurate client estimates – A history of employee time tracking helps set reliable client estimates.
•
Tracking billable time – It sounds like a no-brainer, but company revenue depends on correct time tracking.
8
DEMYSTIFY EMPLOYEE CONCERNS You need to let employees know that your time tracking intentions are not sinister. Quell concerns about “Big Brother” by ensuring employees you won’t be using time tracking solutions to spy, micromanage, or for disciplinary oversight. Things like monitoring technology use and GPS tracking—common time tracking features employees worry about—are meant to help reach the company’s productive goals together as a team.
MAKE TIME TRACKING PART OF YOUR ONBOARDING PROCESS How you introduce time tracking to your team means the difference between a successful rollout and a stressful situation. The areas where you’ll likely run into snags are new and future hires. The best way to motivate employees to track their time is to make time tracking part of the onboarding process. Establish your goals and expectations on Day 1, and time tracking becomes part of the everyday workflow.
9
INTEGRATE TIME TRACKING INTO EMPLOYEE WORKFLOWS But what about your current employees? The best way to minimize adjustment disruption is to tailor time tracking methods to existing employee duties and technologies. You don’t need to reinvent the wheel, and smart employee utilization drives profits. •
Track time on devices – Give your sales reps, service providers, and office employees ways to track time on the tablets, cell phones, and desktop computers they already use.
•
Track time using office tools – Does your company already utilize office management platforms like Basecamp or Trello? Take advantage of Toggl or other time tracking integrations those platforms offer so that employees can stay in a single platform to complete those administrative tasks.
POSITIVE OVER NEGATIVE REINFORCEMENT FOR TIME TRACKING Chances are employees will learn to hate time tracking if it’s a burden. Don’t make the process a negative one. Instead, make time tracking a positive experience. Try offering incentives for 100% team participation. Something as simple as happy hour on the company or as elaborate as a special company event can go a long way.
TIME TRACKING SHOULD BE EASY AND INTUITIVE The easier it is to track time, and the more aligned employees are with company time tracking goals, the more positive the experience. Time tracking should be easy. It should be stress-free. That’s your objective. Do this, and you’ll motivate your employees to use your time tracking solution.
10
T-Sheets Provides Time Tracking Solutions The process of effective time tracking is made much easier with T-Sheets. Intuit’s time tracking solution connects to QBO for accounting and ADP for payroll, two trusted services that are both industry standards. By integrating these services, businesses will see many processes improve. The need to enter time tracking data is eliminated, saving time for managers and accountants. The potential for introduced errors during data entry is reduced almost to none, as the integrated systems communicate the raw data captured by time tracking software. Studies show that employees who track their time after the fact submit accurate reports only 44% of the time. With T-Sheets you can count on more accurate reports that are in greater detail about hours spent by employees. The introduction of GPS time tracking brings benefits to staff management. Having a real-time map of employee deployment means that the closest employee can be dispatched to resolve any situation pertaining to your business. This provides improved service times, reduces resources spent on employee travel, and can increase the overall productive hours for your employees by 15%.
Integrated time tracking tools offer direct benefits for employees as well. Reminders based on time or location help employees log their hours right away. Time spent on projects can be reported as they are completed instead of recorded from memory when an employee returns to the office. This helps employees make sure they are compensated for all the work they perform throughout the day and ensures that the client is charged the correct amount. With 28% of workers acknowledging that they work off the clock, integrated time helps keep those hours recorded correctly. T-Sheets is an affordable way to bring these benefits to your business. Subscription fees cost as little as $6-8 per person, meaning that the profitability benefits that come with integrated time tracking will far outweigh the cost of maintaining them.
Integrated time tracking tools offer direct benefits for employees, like simplifying administrative tasks and ensuring they’re paid for hours worked.
12
Time Tracking Should be Simple and Effective Time tracking shouldn’t be labor-intensive, and it shouldn’t be complicated. The process needs to be simple enough that employees do it on a regular basis. When they do, and when companies leverage this data, they gain insight into company performance across cost drivers, data, and employee productivity. Taken together, this provides an important view of company performance that can influence longterm strategic decisions for staffing and team management. With the cost of human capital being so high, there’s no easier way to boost your company’s profitability.
With the cost of human capital being so high, using data to manage work allocations and pricing can drive your firm’s profitability.
13
Key Takeaways for Boosting Profitability Through Time Tracking Your simple guide to the benefits of time tracking for service business profitability Given that labor costs are one of the biggest cost drivers for service businesses, it stands to reason that workforce management would be a priority in the push for profitability. No other area of your service business has as much impact on your bottom line—and as such, it’s to your benefit to take a long, hard look at what your team is up to. To recap, here’s a quick rundown of everything you need to know before you get started with a time tracking solution:
14
1
Inefficient workflows are drags on your profitability, whether you’re aware of them or not.
2
Time tracking is a simple way to get a handle on labor costs and balance expenses against service volume.
3
These software tools can be integrated into your existing payroll software, increasing workforce management capabilities without significant investment.
4
But remember—time tracking requires organizational buyin. Managers will need to educate and motivate teams to use these tools consistently.
5
Subscription-based time tracking solutions offer a lowcost way to explore these productivity benefits and the ROI therein.
6
With time tracking tools and consistent processes behind them, your business will get more insight into your labor costs, service efficiency, and other metrics driving your profitability.
SmartBooks
|
SmartBooksCorp.com
| info@smartbookscorp.com
|
978.202.3064
ABOUT SMARTBOOKS SmartBooks provides outsourced , bookkeeping, accounting, payroll, finance, tax, and HR services for small businesses. We’re committed to giving small business owners a level of service and expertise typically reserved for larger companies — but at a budget-friendly price.
Need help improving your company’s profitability?
©
TRUSTED BY LEADING SMALL BUSINESSES
CONTACT US