Top 6 reasons to track your time

Paul Doerwald
July 29, 2020

No one likes tracking time! Time sheets are tedious, frustrating, hard to fill in, and often inaccurate. But in spite of all that, there are very good reasons to do time sheets.

You bill by the hour

Anecdotally, about 50% of agencies and freelancers bill by project, 50% bill by the hour, and 100% do both at one time or another 😆!

If you fall on the bill-by-the-hour side, then you already know why you need to track your time, and you’re probably(!) already doing it.

If you bill by project, you can avoid tracking time, as long as you’re content not knowing if you’re profitable.

The project has an unclear scope

Change management is hard. Projects rarely turn out the way they were envisioned. If you’re not sure where a project is going to end up, or how it’s going to get there, you might want to track your time. Without a solid change management process, time sheets can be really helpful when you need to tell the client “AUGH! This project is going big and I’ve run out of time! What can we work out?” Pro tip: in my experience, clients are usually pretty cool about expanding budget when they recognize that the scope has changed, especially if you can show how much time you've used.

You’re working on more than one project at a time

If you’re the kind of worker that works on one project all day every day for weeks on end, then don’t waste your time with time sheets. In fact, you have my permission to tell off your boss if they make you fill them in 😅.

However, if you’re working on more than one project at a time, you’re probably juggling deadlines, shifting priorities, making “quick” tweaks, and responding to emails from all your clients all day long. With multiple projects on the go, it becomes impossible to know what you did, for how long, and for whom. Worse, you won’t know if you’re profitable or not.

This might be the first project of many for a new client

If there is an opportunity for a long-term relationship with this new client, then it’s important to get it off on the right foot. The wrong foot is letting the client believe your work is less expensive than it actually is. You don’t want to give them any deals without them knowing they’re getting a deal.

I’ve found that it’s best to be very clear, even on bill-by-project jobs, is to be overly communicative about budget usage. (Yes, bill-by-project jobs have implicit budgets, even if you don’t want to believe it, or track time on them.) The communication can be as simple as "We’re on track with the budget and timeline” or “We’re starting to run out of budget because of ‘x’ and ‘y’.” If the client wants more detail, they’ll ask, and if you have the time sheets to support your position, they’ve requested changes, and they want to continue working with you, they’ll often either increase budget, or decrease scope.

If the client is unwilling to budge (“you bid on the project, you live with your estimate”) then although you’re still bound to your current contract, you’ll know not to sign another one without massively protecting yourself.

You have staff to pay

Some agencies — I’ve heard them called “body shops” — are fortunate because they assign a staff member to a client exclusively. Sometimes the client even manages them! The client basically pays the employee’s salary, plus a substantial markup, and the agency laughs all the way to the bank.

However, most agencies have staff working on multiple projects at the same time. Without time sheets and accurate utilization numbers, your agency can oscillate between feast and famine. Here’s how it happens:

You pay your team’s salary every month, regardless of what they’ve delivered. Your client on the other hand pays at various points during your agreement. If the next client invoice payment is a few months away, then you have to cover salaries until then. But you already know this part 😄.

The hard part, and the reason why time sheets are so critical to an agency, is understanding why this oscillation happens. When you submit your proposals and estimates, everything looked great. The forecasts were perfect. You were going to be rolling in money. But then reality hits:

  • A project takes longer to do than you planned
  • Time gets burned up in internal meetings, job interviews, performance reviews, planning, administration
  • Staff get sick and take vacations
  • Clients come out of the woodwork with urgent projects
  • Your staff works overtime to get a project done
  • and all the other chaos 🌪 that happens when you do project work!

All the little things that go wrong on projects in agency life end up delaying projects, and delaying payment. With accurate time tracking, you can analyze how your team has used their time in the past (utilization), and how much billable time has been used on each project. Time sheets quickly show you not only that calendar time != project time, but also where your money is leaking and how to put a stop to it.

You’d like to pay yourself more

There’s a trap a lot of freelancers fall into: win a job; work hard on it; send an invoice; get paid; wonder why you’re eating Mr. Noodle. The easy answer is “just charge more”, but in practice it’s not that simple. “Just charge more” implies you understand the cost and value of the work you’re delivering.

By tracking your time, you’ll see how long a project actually takes you. This is your time cost. Divide your total price by the total hours on the project, and you’ll get your effective hourly rate. To pay yourself more, you’ll need to increase your effective hourly rate.

There’s a subtle but important difference between “charging more” and “increasing your effective hourly rate”. Charging more for a project will only increase your effective hourly rate if you also keep your total hours the same. It takes discipline to adjust only price or hours without adjusting the other.

Next, once you know how much a project actually cost you, you can ask yourself the value questions:

  • Did the client get value from the project, as delivered, for the total price? (You can usually tell the answer for this by how happy the client is, how quickly they paid, and if they expressed a desire to work with you again.)
  • If your client had paid 10%, 25%, 50%, and 100% more for the same work, would they have been as happy as they are right now? (Don’t assume that people are less happy if they have to pay more. There’s a certain point where that’s true, but up until that point, client happiness is not directly connected to price.)
  • Putting yourself in your client’s shoes, if your vendor said that they estimated ‘x’ hours but the project actually took them ‘y’ hours, how would you feel? (Don’t actually do this; it’s just a thought exercise.)

With time sheets, you can analyze how you spent your time. You can start unravelling why you’re earning how much you are, and you can come up with strategies to increase your pay.

Conclusion

There are lots of good reasons to track the time you spend on project work. We believe that successful agencies and freelancers, especially those that want to grow, track and analyze how they use their time.

We know that tracking time is hard. That’s why we built our AI-powered time tracker. Clockk helps you remember what you worked on, when, and for whom, so that doing your time sheets is simple and satisfying. Sign up for our free plan, or trial one of our paid plans right now.