How Billable Time Tracking Can Transform Your Business and Skyrocket Your Profits
Whether your business is a creative agency or a contracting company, keeping track of the amount of time you and your employees spend on your client projects can be a major headache. Yet, balancing and accurately tracking billable time is absolutely vital for the financial success of your company.
In this guide, we’ll discuss why it’s so important to track billable hours, and give you a few tips for automating billable time tracking for improved efficiency and profits:
The Difference Between Billable and Non-Billable Hours
Before we dig in, let’s start with the absolute basics.
Billable hours are, as the name suggests, the hours that you charge for the work you and your employees perform on client projects. Those could range from administrative work right through to web development, consultancy services, or the time a contractor spends working at a client’s premises.
Non-billable hours, on the other hand, are slightly trickier to define and depend entirely on the type of business that you run. Here’s a few examples of non-billable time that apply to “generic” businesses:
- Training activities.
- Sick time.
- Office management.
- Internal marketing.
Those tasks are all fairly obvious examples of non-billable time, but there are a couple of additional activities that can cause major headaches (and lost revenue) to service providers:
- Hours lost when a project overruns its deadline.
- Wasted time due to unforeseen changes made by clients.
These types of issues blur the lines between non-billable and billable hours. So you need to clear things like this with your clients, before they happen, to agree on whether this should be billable or not.
The Importance of Billable Time Tracking
By getting into the habit of utilizing a billable time tracking solution, businesses can not only issue more detailed invoices, they can also begin to build an accurate picture of time as a whole, making it much easier to mitigate uncomfortable situations and better forecast for the future.
The Benefits of Billable Time Tracking:
Tracking billable time gives vital insights into the health and efficiency of your company. Even if you charge fixed rates on a project-by-project basis, billable time tracking can by used internally as a means of understanding the time and cost that your project management decisions incur.
Here are some of the advantages of tracking billable hours:
You’ll Never Sell Yourself Short
The most obvious reason to make (automated) billable time tracking a priority is to make absolutely sure that you’re not under-charging for the hours you and your team spend working on client projects.
Even if you invoice clients on a per-project basis, accurate billable time tracking will allow you to set an estimated hourly rate in order for you to figure out how realistic your current pricing models look.
You Can Start Vetting Clients for Profitability
Some jobs take longer than others, and certain clients can be more difficult to work with than others. That’s just a fact of life.
However, if you’re logging the hours you put into your projects using billable time tracking, you can begin to evaluate whether working with certain clients is actually a worthwhile venture for your business.
Nobody is asking you to fire your clients, but it makes zero sense to continue working with people or organizations that waste your time or demand rafts of last minute changes to your work. By tracking billable hours, you’ll have a powerful tool for renegotiating contracts in the future.
You Can Monitor Your Team’s Performance
Billable time tracking is not just for external purposes, it can be used to track the productivity of your employees too. If your staff are using automated time tracking to log the hours they spend working on projects, you can assign separate hourly rates to those logged hours, and get a better feel for which members of the team do best on certain types of projects, and better forecast how long each employee takes to complete their work.
Which leads us to…
You Can Plan Time More Efficiently
Good time reporting not only allows you to get a handle on how costs are accruing on your projects, it also allows you to allocate resources more effectively and predict when you’ll need extra help on a complicated task.
Even if you’re the manager of a team of salaried staff, using billable time tracking as an internal productivity tool will help you to project-manage better, because once monetary value is attached to time, you’ll immediately see the financial impact of your decisions.
You Can Create Better Quotes and Estimates
Probably the most important reason for a company to implement billable time tracking is the increased accuracy it brings to quotes, proposals and estimates.
This has a dual effect: First, clients love detailed proposals. If you’re able to show (using the data gleaned from your timesheet software) an exact breakdown of the costs of a project, you’ll almost certainly give yourself extra credibility and proof of competence. Second, you’ll be able to pitch more confidently knowing that you’re neither selling your product short, nor charging too much.
Having a detailed log of the billable hours incurred on previous projects makes for a powerful negotiating tool.
How to Begin Billable Time Tracking
There are dozens of apps and software solutions that allow managers and teams to accurately track time and hourly rates, but the easiest way to get started, is by using an “Add-In” that integrates into Microsoft Outlook’s calendar.
Using an Outlook Add-In offers several key advantages over apps or individual time tracking services:
- Your team probably already uses the Outlook Calendar, which means less time learning complex new software.
- Because Outlook is already installed across your team’s computers, less IT administration is required to get up and running.
- It can be tough for employees to get into the habit of regularly using a standalone time tracking app. This leads to inaccurate data, whereas with an Outlook integration, staff only require one point of contact.
Once an Outlook Add-In is set up, it becomes trivially easy to add various hourly rates to different staff members or activities, and then efficiently log time whilst adding entries to the Outlook Calendar. Once the system has been in operation for a period of time, managers will have access to a powerful data set that can be exported, ready to analyze company profits and efficiency.
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