Continuing the saga of “time is money…” Last month I wrote about how important it is for the small business owner to know exactly how his/her time gets spent – billable or non-billable, sales development or staff development and list goes on. This month I want to dive into tracking time at the company level. Tracking the staff’s time is critical for any business in the professional services as well as the trades. Web developers and general contractors, graphic designers and plumbers. They all sell time, sometimes time plus materials.
Precious billable hours. So if your firm provides services (basically people paying you for time) and your company is not tracking every minute of every employee’s work day, I’ve got one question for you. “Are you nuts?!?” Granted, I’ve spent three decades in the accounting profession where tracking time in 15 minute increments is essential to receiving a paycheck. Maybe my perspective on time tracking is skewed. But here are some observations on time tracking. Numerous clients have said, “I see your point.”
- If you sold stuff instead of hours, you would undoubtedly have some kind of system to track all the products. It would be called inventory management. And the inventory management system would help you understand the hot sellers, the clunkers, when to re-order, when to offer discounts, and much more. Turns out time is different than any product we might sell because we can’t simply call up the supplier and order more. Once the sun sets, that time is lost. Time tracking provides the critical inventory (hours as billable time) management tool for a service business.
- When a service business suffers poor cash flow or merely underperforms projections, time tracking proves critical to diagnosing the problem and prescribing a fix. Effective time tracking has helped me discover my most productive employees, my most profitable clients, and my most profitable projects. Time tracking is essential to improving the business results of any service business.
- I work with many clients who charge their clients flat rates for projects or jobs – websites to houses. When they prepare the proposals for these projects, there is always some calculation of how many hours will be spent providing services. That time calculation drives the pricing. Many of these same clients never track the actual time spent delivering the services. Consequently, the business owner has no idea whether their time and energy actually produced cash in the bank. I brought a client close to tears by adding up hours and showing him how little of the huge check he’d received he actually got to keep.
Get your company busy tracking time! QuickBooks comes fully loaded with time tracking capabilities. Call me, and I’ll help you turn this feature on. There are many affordable web based options (some of which integrate with QuickBooks) and many of these make time entry as easy as a smart phone app. Call me, and I’ll steer you toward one that fits for your business. Heck, use paper and pencil if you have to, but get your company in the habit of recording all of its time and energy. There’s an old saw that goes “knowledge is power.” I would modify that to “knowledge about time produces profits.”
Wishing you lots of positive cash flow,
What Can I Learn Today to Improve Our Financial Performance?
You can hear when an engine is running smoothly—or racing or sputtering. The same is true for the financial drivers of your business.
You just need to know what to listen for. The good news is that your numbers are talking all the time!
Here are the best ideas we can find on how to ask your business for the information you need, to understand what it says, and take action on what you learn.