The Real Costs of Not Tracking Your Time

John Reeve | January 18th, 2024 |

Photo of a puzzle close up with one piece missing

Professional services agencies are one of the most common types of small businesses in the world. One of the most essential tools they can and should embrace is time tracking. However, many of these agencies don’t track their time, or do so inefficiently.

We were once one of those agencies that tracked their time poorly. We had a few time tracking mishaps in our first few years, which taught us the real costs of not tracking your time well. Here’s what we learned.

Inaccurate Guesstimates

I’ll never forget the excitement of landing our first big client. By then we had completed a good number of smaller projects, and we felt confident about taking on something bigger. Before work could begin, however, we had to go through the process of estimating the project.

We had very little historical data to go on, mostly in the form of paper timesheets and Excel spreadsheets. We did our best to analyze what data we had and put our best estimate forward.

Months later, as the project was coming to a close, we realized we had underestimated our time and effort. Not only that, but we’d understated our actual hours as we tracked them. This was not going to be a profitable project. When we finally tallied our time, we confirmed we’d lost money on the project.

That didn’t have to happen. If we’d had been more disciplined at tracking our time, and used proper time tracking tools, we would have been able to estimate the project more accurately. (This moment became the catalyst that launched our journey into building Intervals, our time tracking software for professional services agencies.)

Reduced Revenue

Once we ditched the paper timesheets and Excel spreadsheets, and started using time tracking software, a peculiar thing happened. Our revenue started going up. We were still coming into the office and leaving at the same time each day, and juggling the same number of projects — so what happened?

We dug into the data, comparing the old and new methods of tracking time, and quickly discovered the answer. Our software featured timers, which we used to track our time as we worked on each task throughout the day. We were no longer waiting until our next break, or worse, the end of the day, to jot down our hours. As long as we remembered to start and stop our timers, the software took care of the rest.

Our analysis revealed that our previous methods of tracking time were capturing only 70% of our time. In the years since that revelation, we’ve heard from countless companies with the same experience.

The lesson here is simple. If you aren’t tracking your time well, you’re not getting paid enough.

Decreased Accountability

Every professional services agency will have some clients who question their bill. These clients are usually well-meaning and simply want a better understanding of where their money is going. It’s important to be able to answer their questions with confidence and accuracy. Accountability builds trust, a cornerstone of any business.

When agencies don’t track their time, or track it poorly, they will lose some accountability with clients who want a more transparent business relationship. They might even lose those clients altogether.

Fortunately, the inverse is also true. Those agencies that deploy time tracking software will experience longer lasting, more profitable, relationships with their clients.



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Intervals Blog

A collection of useful tips, tales and opinions based on decades of collective experience designing and developing web sites and web-based applications.

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Intervals is online time, task and project management software built by and for web designers, developers and creatives.
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John Reeve
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John Reeve

John is a co-founder, web designer and developer at Pelago. His blog posts are inspired by everyday encounters with designers, developers, creatives and small businesses in general. John is an avid reader and road cyclist.
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Jennifer Payne
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Jennifer Payne

Jennifer is the Director of Quality and Efficiency at Pelago. Her blog posts are based largely on her experience working with teams to improve harmony and productivity. Jennifer is a cat person.
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Michael Payne
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Michael Payne

Michael is a co-founder and product architect at Pelago. His contributions stem from experiences managing the development process behind web sites and web-based applications such as Intervals. Michael drives a 1990 Volkswagen Carat with a rebuilt 2.4 liter engine from GoWesty.
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