I’ll be the first to admit that time tracking is boring. It’s mundane and monotonous. But, I do not think time tracking is a waste of time. In fact, it’s quite rewarding for any small business that decides to do it, even if they don’t bill hourly. Yes, it does require time to track your time, but, here’s why the benefits outweigh the time commitment…
#1 Time Tracking Keeps Us Focused
It’s not uncommon to get carried away and lose track of time while working on projects we enjoy. As we pour ourselves into our work, hours can slip by unnoticed. By the end of the day we may have spent more hours on a task than we should have. And now we’ve gone over the estimate and neglected other projects. If this pattern were to repeat long enough it will put our projects at risk.
Filling out a timesheet each day will alert a project manager to these anomolies so they can correct course before it becomes a bigger problem. And, by aggregating everyone’s weekly timesheet into reports, online time tracking software can help you analyze your team’s time to maintain a healthy momentum.
#2 Time Tracking Increases Billable Hours
In addition to our own experience, we’ve surveyed several small businesses who deployed time tracking software. The stories are always the same. These agencies increased their billable hours by up to 30% without working an extra minute. What happened?
When we keep a manual accounting of our time — whether that be using spreadsheets or paper timesheets — our recollection is lossy and a significant percentage of our efforts go unrecorded. Time tracking software, however, uses timers and does a better job at capturing every minute of our day. In addition to paying for itself, time tracking software can make your agency more profitable.
#3 Time Tracking Maintains Monthly Retainers
Many small businesses, especially those offering professional services, have discovered the benefits of selling monthly retainers to their clients. The client is billed a monthly amount and the agency sets aside a number of hours for ongoing work. In some months the hours worked will come in under the allocated amount, and some months it will go over.
For a monthly retainer to be profitable, the monthly hours need to come in under budget in as many months as possible. Time tracking software keeps track of the hours spent on each monthly retainer, so we can know exactly where our time is going. This makes it easier keep hours under budget and, if necessary, to renegotiate the monthly retainer terms when it comes time to renew.
#4 Time Tracking Makes Us Better Project Planners
Once we know exactly how much time went into a project it becomes much easier to estimate a similar project in the future. The more projects we track, the better we become at project planning. We call this feedback loop the Predict, Track, and Learn methodology.
First, we predict how much time a project will require. Second, we track our time with software as we work each task. Finally, we analyze the data and learn from it — figuring out what went right and where we need to improve. When it comes time to start a new project we can use past data to quantify our efforts on similar projects and produce a far more accurate estimate.
#5 Time Tracking Has Tax Benefits
If your small business is in the United States and is developing something remotely innovative you may qualify for a research and experimentation tax credit. Also known as an R&D credit, this tax incentive can lower both your federal and state taxes.
However, it’s the taxpayer’s responsibility to document the qualifying salaries and expenses. Time tracking software provides a detailed accounting of how many hours were spent on qualifying work. Plus, the amount of tax credits you can claim is more than enough to pay for the online time tracking software you will need to document your time.