It's important to consider the specific needs of your business and clients when deciding whether to implement such a system. In conclusion, tracking time for staff and billing clients by the hour can have both pros and cons. Reviewing reports to analyze how time was spent can take away from other revenue generating work and added costs to overhead. This will help when you are trying to estimate time for similar jobs in the future.Ĭon: Tracking time can be a time-consuming task, requiring staff to log their time and for managers to review and approve the hours worked. Time tracking also allows you to analyze the time you spend on specific types or work or projects. This can lead to better time management and more productive work. Pro: Tracking time creates accountability for staff, who know that their work is being monitored. Emphasize that timeliness and accuracy are the most important aspects of the work, and they should not be compromised. Thought: Paying staff a salary or fixed fee based on the expected number of hours the work should take will incentivize them to work more efficiently. This is because they are not being rewarded for completing work quickly, but rather for spending more time on the work. You can also identify any issues that may be causing delays in completing client work, allowing you to make changes to improve efficiency, preventing similar delays in the future.Ĭon: When staff time is monitored and they get paid based on the amount of time they spend on a client’s work, it can reduce their motivation to work efficiently. Pro: When you track time for payroll, you can monitor staff productivity and only pay them for the time they spend on client work. In this type of situation, it's important to keep the client updated throughout the project in the event you run into unforeseen issues that will take more time to resolve and to let the client know there may be an additional fee. One way to handle this would be to estimate the amount of time you expect a project to take, based on past experience, and quote the client a fixed fee based on the minimum and the maximum amount of time you believe the project might take. Especially when you are unsure of the situations you might encounter once you dive into the work. This can also raise questions with your clients when they suddenly receive a bill for a significantly higher amount than the previous months.Įxception: Project work, such as system setup, clean-up, or technology implementation, is one of the few exceptions where time tracking might actually make sense. This also makes it hard for both you and your clients to budget when it's unclear how much time a job will take until it's completed. Thought: If you are in the business of selling time, you will limit the ability to scale your practice without adding additional staff since there are only so many hours in a day or a week. If you are billing by the hour, your revenue will decrease. By billing clients based on the amount of time spent on their work or project, you can ensure that you are being paid for the time you spend on their work.Ĭon: As you become more familiar with the work it may take your staff less time to complete the tasks. Pro: Tracking time for staff members allows for semi-accurate time billing of client work. While time tracking is still common practice in the profession, it's important to consider the pros and cons when deciding if to track time and what to use those time records for. While I found this information enlightening, I quickly found myself going down a rabbit hole, spending too much time analyzing the information where I could have been producing more work output and generating more revenue. We still tracked time for our staff and used the time reports to track team productivity as well as profitability by client. We made sure our engagement letters clearly defined the scope of what was included in the fixed fee and what the rate would be for any additional services needed. This practice not only allowed us to better manage our cash flow but also allowed our clients to budget for their accounting services. We quickly moved to a fixed fee service and based the fee on the average number of hours the work had previously taken us. After a few years I realized that billing for time limited our ability to scale and did not serve our clients well. When I originally started my practice back in the late 90’s everyone tracked and billed for time, it was just the way we did it. How do you decide when/if to track time for client billing and or payroll. As always time tracking is a hot topic in the accounting and bookkeeping profession.
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