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Nicole Tiefensee

Why Your Business Needs Time Tracking

To track or not to track? That is the question about time tracking you've probably asked yourself more than once. If you own a business delivering services, time tracking is worth the hassle. Here's why.

Time tracking might not be the first thing that comes to mind when you think of running a business. What good is tracking time and how hard can it be, anyway? 

It might sound like a pretty straightforward activity, but it can actually be quite difficult to do effectively if you don't have the right tools at your disposal.

Finding a time tracking app also sound like a hassle, but there's really no way around it. Consider this: You can't improve what you don't measure. By measuring project time and budgeting effectively, you can reduce waste while ensuring profitability. And that's exactly what time tracking helps you achieve.

On average, employees spend only 2.8 hours of their day on productive tasks. What do they then do the rest of the day, where does all of that time go? And how is it that such a pressing matter keeps falling through the cracks? 

Surely, if you were to find out that so many business hours (hence, your business expenses) get wasted, you would feel an urgent need to do something about it?

While this is indeed a pressing employee productivity matter, you can get it under control with automated time tracking

Here’s all you need to know. 

What is time tracking? 

Depends on the perspective you take to look at it. 

From the perspective of an employee, time tracking apps show how much time you use doing a specific unit of work, be it a single task or a whole project. 

From the perspective of the business, time tracking can show you, in simple terms, where your money is going. It shows whether people receive fair compensation for the work they do and whether that work is actually worth investing, especially if you are working with payroll. 

With time tracking insights, it’s easy to reflect what type of tasks take the most time and then decide whether they bring enough value to the company. As such, time tracking is one of the keys you need to build an efficient business, one where decisions take place based on numbers and facts, rather than gut feeling.

But time tracking is not just about the quality of payroll or task value calls — if you really consider all aspects of it, tracking time in employees brings lots of perks into the game. 

So here is a short overview of reasons proving that you need to invest in a time tracking app, if you aren’t already doing it. 

Why is time tracking important? 

Time tracking is essential for a project manager to do basic employee monitoring. When you know where your team is spending their time, you can easily see if they’re over-committed or working on the right things. A recent research by The Drum found that workers spend only 27% of their day on tasks that are directly related to their skills, the skills they were hired for and are expected to contribute to the team. 

Getting some of the ‘irrelevant’ processes automated is, therefore, a way to increase employee productivity, resource utilization, and overall business output. 

Time tracking gives you the data you need to make better decisions in your projects and improve the productivity of your team. Without it, there’s no way to know if you’re hitting your deadlines or even if you’re in danger of missing them.

Not to mention that when you know how much time is being spent on each task, you can better prioritize future projects, allocate staff and resources, and improve your bottom line.

why is time tracking important

Types of time tracking 

There are several types of time tracking. Each one has its own advantages and disadvantages, and you can use more than one type of time tracking at once in your business. Here are the two key types:

Project time tracking

Project time tracking is the simplest and most high-level type of time tracking that helps you follow project progress. You create a project in the system, and employees log their time on it. It's easy to set up, but it doesn't give you the details about the work which was done on the project. The main advantage is that it doesn't require any additional effort from employees. They don't need to create tasks, fill in descriptions for them or assign time to them — they can simply log their hours for each day and log off.

Task time tracking

Task time tracking allows you to track hours not only on projects but also on tasks, it’s as granular as it can get. To enable task time tracking you need to first create projects, then add tasks to them, and then employees will be able to track their work hours on these tasks.

It requires a bit more effort from both managers and employees, but it also gives better insights into people's performance because you can see how much time they spend on each task. As such, this is the best option for employee time tracking — here you get to really see where and how you can increase operational efficiency. 

What type of time tracking you choose to go with should primarily be determined by your business needs and expectations. If you want to go granular and make sure people spend most of their time on specific tasks — task time tracking is the obvious choice. After all, in many cases, people spend only 20% of their business hours on relevant and high-priority tasks, studies suggest. Registering time on projects, however, will also give you a sense of your billing efficiency.

Note: to improve project tracking, it's recommended to track time in one project management tool where absence tracking is also performed.

Benefits of using time tracking software

According to the Economist and their research on the automation maturity curve, 73% of companies say they are very happy with the returns they get from automating their business processes and tools. 

Still wondering if time tracking software is for you though?

Here are 5 key benefits that will convince you it's a must-have tool:

Improved productivity of employees

Having your team use time tracking software gives you an accurate look into how they're spending their time. This can help you identify what activities are productive and which ones could be streamlined to make for more efficient use of time. 

An average professional, for example, spends 28% of their workday answering emails, Harvard Business Review found. This is the type of improvement area time tracking could help you identify and eliminate. 

If you know how long it takes your employees to do their tasks, you can use that information to plan your project more effectively. You will be able to estimate if the project is possible to complete in the timeframe you want or not and make any necessary adjustments based on the data provided by your time tracking software.

Improved transparency

49% of Americans openly admit to time theft where they use business hours tending to personal matters or browsing the internet for something not related to work. With time being tracked, your team members will know that their efficiency is being watched, so they'll think twice before wasting valuable working hours on personal tasks. 

When you are using time tracking software, everybody knows how much time it takes to complete a particular task, who is responsible for it, and how long it actually took them to finish it. This kind of transparency lets you minimize communication gaps and increase efficiency. It also encourages people to stay motivated and focused on the job at hand.

Differentiating between billable and non-billable hours

One of the main reasons why time tracking software is used by businesses is to accurately measure billable vs non-billable hours. If you have a business where your employees charge by the hour, using this kind of software will ensure that you create invoices correctly and that client billing is done accordingly.

This is indeed a very important feature for companies who work on an hourly basis, but also for those who don’t. It gives you an insight into which parts of your projects can be monetized and which ones cannot. This will allow you to maximize your profits, as well as increase the overall efficiency of your company.

Tracking utilization rates

Utilization rate is calculated by dividing the total number of billable hours worked by the number of hours available for work (full-time employees). Having this information handy can help you assess employee productivity and performance levels, as well as understand how much work should be assigned to each person. 

It is not always easy to tell the difference between billable and non-billable hours which is why time tracking software can help you identify which projects are bringing profit and which ones are not. You can easily see what percentage of your time is spent working on billable tasks so that you can plan accordingly for future projects.

Gary Ward, Director of Global Resource Staffing in Guidewire Software and our panelist on the webinar "Resource Management Mistakes Not to Repeat in 2024," highlights the importance of time tracking for resource management:

Not everybody likes the idea of time tracking. One, it's too administrative; two, "big brother". From a resource management perspective, if you don't see people's time, you're flying blind. It's as simple as that. Even if an organization is sitting at an 85-90% billable utilization, most people close the book. But resource managers go much further. What does the mix of that utilization look like across the group? And what's the time being entered into the system, related to what activities? It really is as much support for the people themselves as it is for the business.

What I mean by that is, with appropriate time tracking, there's less risk of someone burning out, for example. You're in a better position to suggest that additional resources are needed somewhere, and you can assess whether a particular person is consistently sought after for these questions or tasks. It's absolutely necessary. In my view, you can't do without the time entry piece.

Understanding the project margin

In short, project margin is calculated by subtracting the costs of your initiative from the revenue gained in the end. It shows you the netto income of the project, if you will, the result of all the efforts without the time and money investments you put on the table to make the project happen. 

At the end of the day, this is where you learn just how beneficial a specific project was for the company and whether it was worth the effort at all.

What makes a great time tracking app? 

The great thing about time tracking apps is that they follow a very simple concept. You just press a button to start and stop the timer, and you get a record of how much time you spent on a task. But the truth is, the reach of great time tracking apps doesn’t stop there. 

To understand what makes a good time tracking app, it's important to know what you'll use the time registration data for. In this context, the most advanced features of the time tracking apps would be its integration capabilities with project management, resource planning, invoicing, and payroll tools.

The best time tracking apps are always completely reliable and easy to use. They should be able to track employee hours without fail, and allow you to create detailed timesheets with the click of a button. The app shouldn't require any special skills or knowledge for you to easily use it.

The ability to switch between projects and tasks is convenient too. If you work with different clients or multiple projects, you'll need the option to switch between them quickly. A great time tracking app should make it easy to record your time on the go.

Finally, you’ll want basic time tracking features that help you bill your clients, report on your productivity, and keep up with your team's time.

In other words, time tracking tools are pretty straight-forward. Fill in the cell with the time you spent at the end of the day on a project or task, and you're good to go. What else would you fancy in a time tracker?

Advanced time tracking software, however, can provide many additional features, such as easy-to-access browser extensions with timers, time locking and approval features, or even timesheet reminders.

At Runn, for example, timesheets show employees the hours they were scheduled to work on projects every day. But it's possible to add any non-project hours you've worked on such as training, town hall meetings, etc. This can be done either in the app or in the browser extension.

How to introduce time tracking 

Time tracking is the necessary evil, and any employee time tracking software will be perceived as such by your employees. So what can you do to introduce a time tracker smoothly?

Point at the benefits behind a time tracking app

Explain why you want them to use a time tracking tool and how it will benefit everyone involved. For example, a recent US research found that 93% of employees say they always get their paychecks on time because their company uses productivity tools, including time tracking. 

More accurate reporting also allows you to charge clients correctly, which means better client retention and a larger profit margin for the whole company. Hence, quicker growth and more career development opportunities for every employee. 

Explain what time tracking software is not

If employees think they're being monitored, they may not use it or use it incorrectly. Stress that you're not interested in micromanaging their workday — only in making sure the company bills clients correctly and fairly.

Find a simple time tracking app

If your employees don't like using the software to track time, they won't use it or will only do so half-heartedly. Look for a tool with an intuitive design, clear instructions and easy navigation. You don’t want a productivity solution like a time tracking tool to, ironically, reduce the productivity of your teams and clutter their work environment. 

Read our dedicated guide on how to introduce time tracking without alienating your team. ➡️

Time tracking — best practices 

1. Automate your time tracking process  

Time tracking is easy in the sense that it’s easy to do it, but it requires some discipline and routine. Without those, it can get messy, especially if you do it manually. 

In fact, a recent survey found that 80% of US employees submit their time sheets with errors which later need to be corrected. It happens because people often forget to check in and check out, let alone manually track time each task takes to complete. 

The best way to improve the time tracking process is to automate it. Use that online time tracking spreadsheet.

This is most important when it comes to remote workers, who are often on their own and may not remember to clock in and out. It's also useful for companies that have employees working on more than one project at a time, as it can be hard for them to remember which tasks they've spent time on and how long they've spent on each of them.

But automatic time tracking is particularly important for businesses in the professional services industry. While it can be put to use by any company that has hourly workers or needs to monitor employee productivity, it's essential for businesses that bill their clients based on the hours worked by their staff.

For instance, with Runn's Time Tracking Chrome extension, you can automatically fill in your timesheets and let your team see what is scheduled each day so they can instantly record their time.

2. Put your time tracking data to use

Using a time tracking app is an easy way to get real, actionable data about how your business operates. It can be used to find out where things are going right, and where they can be improved upon. Seeing time spent, you'll have a better understanding of what's keeping you from accomplishing your goals. 

With the help of that time tracking data, you can prioritize more efficiently by finding out which tasks are worth the time and which aren't, stay on top of deadlines and deliverables by making sure the team is focused on the right tasks at the right times, and improve productivity by getting rid of distractions and streamlining the workflow. 

3. Leverage time tracking software features

Time tracking tools have gone a long way — they are not just about registering time anymore, they are about integrations with other performance and project management tools and increasing employee efficiency at scale. 

A recent report by Deloitte shows that 50% of professionals who don’t get to enjoy automated systems claim that data input and adjustments are the most time-consuming parts of the time-tracking process. This is the kind of game where time tracking loses its value — why do it if it only makes things more complex?

The most important thing to remember about time tracking is that it's not supposed to be a burden. The best time tracking software can be set up to determine when each team member punches in and out, and even automate the process of allocating their hours across projects. The goal is not to increase administrative overhead but to save money and improve your bottom line, so make sure you find a solution that works for your business rather than against it.

4. Know what you’re tracking and why

Chances are that if you're reading this article, you already know why you need to track employee time. However, it's still important to have a clear picture of what exactly you need from time tracking. Do you want to track employee productivity? Do you want to accurately bill clients for the hours your employees worked on their projects? Setting goals before starting to track time will help ensure that you get the desired outcome.  

5. Keep it simple for the people

Don’t overcomplicate the process by adding unnecessary steps for your teams or creating too many categories for tracking time. If you keep it simple, it will be easier to commit to a regular tracking schedule.

The easier it is for employees to log their time, the more likely they'll be to do it accurately. If your employees use multiple tools in a given day — say they spend some of their time using Slack, some using Microsoft Office, some on websites and some making phone calls — then it may make sense to invest in the tool that will make time tracking practically unnoticeable to them.

Final thoughts

Time tracking is an important part of running any business. With it, you can set milestones, calculate project costs and deadlines, monitor employee productivity, and see where you need to make adjustments for improved efficiency.

But for many businesses, time tracking is still a manual task. Employees keep track of their own hours using spreadsheets or paper timesheets, which then have to be collected and collated by managers before any time can be billed or recorded.

Not only is this a labor-intensive system, but it also leaves plenty of room for human error and general inefficiency. Even if employees are diligent about keeping track of their hours, they may not always be accurate or remember everything they did that day. And if you're billing clients based on these timesheets, the result could be inaccurate invoices and lost revenue.

The solution? Time tracking software. By automating the process of recording work hours with a simple browser extension or mobile app, time tracking software can save your business valuable time while improving accuracy and efficiency.

Book a demo to see how Runn can simplify this process for you. 

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