Time tracking is an integral part of many businesses but it’s often a tedious and disliked part. Despite this, time tracking is highly important on both the revenue side and the expense side.
Many businesses employ hourly workers and need to track accurate records of their time for payroll. For smaller businesses, this may be done manually with hand-written timesheets that are submitted for approval or in larger businesses, this may be done with a clock-in kiosk at the work location. In either instance, the time tracking is often done separately of the payroll process and creates a broken process between the employees’ time tracking, the approval by an operations manager or owner, and payroll processing done by accounting. This creates inefficiencies that lose both time and money for the business. On top of that, it often creates communication issues between management and employees as there isn’t always a clear record of the time worked vs the time paid on payroll.
For service businesses, their profitability and success rely on their ability to stay within budgets on their labor time. It’s crucial that owners can monitor employees’ time by clients or projects in one unified system. This allows for owners to quickly identify issues whether it be a scope change on the project that is causing more hours to be worked or issues where an employee may be taking too much time to finish a task. This could highlight a need for better training or education that needs to be addressed. Without good tracking, you won’t be able to pinpoint these issues or know the actual time it takes to complete a job for a customer. Often, people underestimate the actual time it takes so they underestimate the price to a client. This directly impacts your profitability because you won’t have the margins on your labor that are necessary to cover your other operating costs. This will cause you to lose money on your business in the near term and if not fixed, it will make it difficult to stay in business long term.
There's good news though! Time tracking doesn’t have to be painful and it can be done in a unified way that streamlines your processes for both client invoicing and payroll. There are many applications that allow your employees to track time remotely (from a phone or computer) and track that time by location, project, and client. Managers can review the timesheets in the system and approve the employees’ time or adjust if needed. The review step ensures consistency and accuracy in your time records and because it’s all in one system, your hours match for both revenue and for payroll. Once approved by managers, it’s a simple process for your accounting team to process payroll, monitor time budgets by client, and bill clients for the time worked by your employees. This will save you many administrative hours which can be put towards growing your business further.
From a bookkeeping automation perspective, it’s especially important to select a time tracking application that integrates with your accounting software and your payroll software (remember the wagon wheel picture). You want the time tracking to be able to sync to your accounting software so you can use the tracked time for customer invoicing. You also want your time tracking application to connect with your payroll software for streamlined payroll processing of hourly employees. Applications such as TSheets, Harvest, Toggl, and Deputy are all good options that connect to many accounting and payroll softwares. They each have their strengths and weaknesses so it’s important to select one that serves your business’ needs best.
Time tracking applications are a great example of how an application can both connect directly to your accounting software, a ‘spoke’ connection on the wagon wheel, and also connect to another application on the edge of the wagon wheel to create a seamless automated accounting system.