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How To Increase Profits With Timesheet Software
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4 Easy Methods
In today's highly competitive business environment, companies must seek to
maximize their return on assets, investments and resources; yet many
organizations often fail to make use of a key strategic weapon time. Time is
as critical as money; nonetheless, many companies are not accustomed to
allocating and investing it with the same level of care.
The notion that "time is money" may be better phrased as "time is capital."
Time must be managed, accounted for and invested in ways that maximize return.
This is often easier said than done as companies seldom possess the right
processes and infrastructure to make the most of time resources. Often, they
confuse the core business process of time resource allocation with simple
"timesheets" or "time management calendars." This is as dangerous as confusing a
simple check register with a company's capital investment strategy.
To allocate and manage any resource, one must first see it clearly by
tracking it carefully. Hence, time tracking should be
a fundamental part of any business. Certainly, every business already tracks
time at some level even if only for payroll. The most successful businesses,
however, understand that time tracking is a core business process, and they use
that process effectively.
"But We Already Track Time."
Time tracking is a far more powerful profitability tool than many people
realize. Almost every company has some sort of time tracking system in place
already. Many are simplistic homegrown systems based on spreadsheets. Worse
still are those that are paper-based. Even companies that have fully automated
time tracking systems in place may fail to use them to drive profits up and
costs down.
These companies do not understand how to gather and leverage time data to
their greatest advantage. This process is neither as easy nor as obvious as it
seems. Some companies may understand the potential gains associated with
managing time as an asset but lack the right knowledge or tools. Many others
succumb to a misinformed and needless distrust of time tracking. Still others
mistakenly believe that time tracking systems are simple, and develop or buy
inadequate systems that fail to deliver real value to the entire enterprise.
An expertly developed and finely tuned time management system can become a
window into the real-time costs of any organization. Such an application
provides:
- A deep understanding of true costs at every level of your business at
a team level, a task level, a project level, a business unit level, and a
company level.
- Complete visibility into these costs for everyone who can impact those
costs.
- The power to redeploy and shift time resource investments to optimize
processes, reduce risk, thwart competition, drive revenue, and increase
profits.
These advantages rest on a foundation of timely, accurate and meaningful time
data. Time is a fundamental driver of cost; therefore, time tracking and
management are cornerstones for building success.
The Relationship between Time and Cost
Understanding time resource allocation gives companies a clear view into
their true costs. While identifying costs is nothing new for most companies,
many experts agree that traditional cost accounting methods may not yield the
right information for some of the most vital initiatives that companies
undertake, such as competitive strategy formulation and execution or project
portfolio management.
"Having an old-fashioned understanding of costs is not
restricted to any particular industry. Many cost accountants are still using
costing methods that bear little resemblance to how real costs behave in the
real world. Traditional cost accounting methods provide a high-level
quantification of average costs for average products. These old-fashioned
techniques may do an adequate job for preparing financial statements, but they
invariably fail in identifying cost for the many companies that have few
products that are truly average." 1
1 John L. Daly, Pricing for Profitability (John Wiley & Sons, October 2001)
New ways of understanding costs, such as activity-based costing, have emerged
to help companies redefine and realign their strategies. Yet these new methods
are only as good as the data that feeds them and time data is a critical input.
The Four Business Functions
To understand time tracking as a core business process, first consider that
time data feeds four fundamental business functions:
- Payroll
- Billing
- Project management
- Business strategy development
These functions are impeded if the information systems that feed them fail to
provide the right data at the right time.
Of the four functions, payroll and billing are the most likely to be
automated. However, companies that track time for payroll or billing purposes
may have systems that are ill-suited for gathering the data needed to improve
project management and business strategy. The right time tracking system will
address all four business functions to provide the greatest value enabling not
only the payroll and billing functions, but allowing companies to manage
projects and formulate strategies more accurately.
Project and Project Portfolio Management
Companies may find it difficult to know which of their projects create
profits. An important first step is to know whether projects are on schedule or
within budget; however, this step alone is not enough. Despite their keen
abilities to remain within schedule and budget constraints, project managers all
too often find themselves out of a job when their projects, product lines or
research portfolios are deemed unprofitable or excessively risky. Budgets and
schedules alone won't make a company successful; only projects that create
profits will drive success.
All projects, whether internal or external, must somehow drive the company to
greater profitability. If they do not, they will be cancelled. The companies
that manage their portfolios of internal and external projects skillfully
ensuring that all projects help the company make money will be the companies
who survive and succeed in good times and bad. The hard truth is that no company
can afford to mismanage its project portfolio. Whether that portfolio contains
two or two thousand projects, the goal remains the same profit.
To reach this goal, companies need to be smarter about how they collect and
use critical time data to evaluate project cost and performance, allocate labor
and other resources, and estimate future project schedules and costs. They can
reduce risk of failure by understanding the true costs of their project in real
time and by taking necessary action sooner, when the chances of success are
greater.
.The right time data, accessible in real-time, is critical to solving project
management problems. The right time tracking system enables companies to manage
projects more profitably by allowing them to:
- Control costs and increase profits:
- Monitor accruing expenses and catch budget overruns before they
happen by comparing budgets to actuals.
- Use historical data to prepare profitable bids in the future.
- View all current expenses as soon as they are entered
- Track and report costs by projects and subprojects with an unlimited
hierarchy
- Attach project-specific pay and billing rate to employee hours
- Stay on schedule:
- Monitor project status and project milestones
- Coordinate extended documentation using interactive group journals
- Exchange data through integration with project management programs
like MS Project
- Leverage project information on demand:
- Use web-based solutions to make information available as soon as it
has been entered
- Enter and track time from any location
- Create custom project fields for free-form text, numbers, or
pre-populated drop-down menus
- Track historical data accurately with globalized activity and task
descriptions
- Collect all project-related data in a single program
Billing
Billing is usually either internal, such as groups that charge their time
back to a cost center, or external, such as consultants that bill clients for
their time and other direct expenses.
Often, internal billing is sloppy or lumped into a vague "overhead" category.
This robs companies of the ability to manage their internal investments. Worse,
it makes cost reductions more painful, because the data is not sufficiently
granular to enable "smart" reductions.
External billing can also be a source of profit leaks. If the billing process
is not optimized, revenue recognition opportunities are missed. Client invoices
are delayed when billing systems are error-prone. Paper-based systems, as well
as more automated methods that still require "double-entry" of data, are good
examples of billing systems that need optimization. Not only must clients be
billed at the fastest rate possible, but billable hours and expenses should be
tracked and managed carefully to prevent dropped bills.
The right time tracking system supports not only project management, but also
enables companies to maximize revenue by capturing time, expenses and other
products or services accurately so no billable items are lost or
under-represented. The right solution allows companies to:
- Maximize revenues:
- Create customized interfaces for ease in employee acceptance and
compliance
- Eliminate double entry errors through online approval routing and
integration
- Flag individual entries with appropriate accounting codes
- Assign multiple billing rates to a single employee
- Shorten the cash flow cycle:
- Enter time quickly and easily from any work location using web-based
technology
- Store all project billing-related data in a single program
- Generate and send invoices any time during the project life cycle
- Allow clients customized access to project time and expense reports
- Leverage billing information on demand:
- Track available budget based on real-time information
- Enter any type of client billing information in customizable fields
- Automate calculations by running reports based on customized billing
rules
Payroll
Tracking time for payroll purposes means tracking either time worked or paid
time off. For many organizations, each pay period brings late, missing or
unreadable timesheets, repetitive data entry and complicated calculations for
employee pay rates and overtime or vacation rules. The right time tracking
system, in addition to supporting project management and billing, automatically
feeds data to the payroll process. It allows companies to:
- Improve payroll systems:
- Set specific pay periods and calculations to fit the payroll process
- Assign multiple pay rates to individual employees based on the type
of employment or work
- Correct prior period totals using negative and positive entries for
accounting records
- Export information into existing payroll, project management, and
accounting software easily
- Increase productivity:
- Eliminate double entry by entering information once
- Automate workflow and manager approval of timesheets
- Schedule repetitive activities such as email notifications
- Define business rules for managing specific classifications of work
like automatic recognition of overtime and vacation accruals
Business Strategy
Time resource allocation drives a company's costs and directly affects its
profits. Companies that do not see, clearly and immediately, where time is being
spent have less control over their destinies. It is not enough simply to take a
stab at the problem of accurate and consistent tracking time. To win the game,
time tracking must be treated as a core business process, feeding both
competitive and functional strategy development. What remains unmeasured and
unseen cannot be controlled.
"The ways leading companies manage time in production, in new
product development and introduction, in sales and distribution represent the
most powerful new sources of competitive advantage." 2
2 George Stalk, Jr., "Time The Next Source of Competitive Advantage," Harvard
Business Review:
Strategy, ed. Cynthia A. Montgomery and Michael E. Porter
(HBR Press, 1991).
Whether a business competes through cost leadership, differentiation, or by
niche focus and specialization, effective strategy formulation and execution
depend on accurate data. Cost leadership strategies are commonly associated with
time resource allocation, since staff time is a key driver of costs.
Differentiation and specialization, however, are also highly time-dependent. In
fact, most companies that differentiate or specialize possess an unrealized
advantage that can be tapped by a better understanding of time consumption.
Functional strategies also rely on time as a basic performance indicator. To
identify needed operational changes, optimize processes, improve linkages
between functional units, or manage channels, a company must start with a
truthful picture of its time distribution. The key to any business strategy,
then, is a highly detailed map of a company's time landscape. The right time
tracking system enables better business strategy and execution by:
- Supporting key decisions with the most accurate picture of project and
activity profitability
- Making time data meaningful in the larger context by allowing maximum
flexibility in the way data are collected, structured, and reported to
accurately reflect business realities
- Streamlining operations by integrating cleanly with existing
business-critical systems that rely on fresh, accurate time and expense data
Sustaining Advantage
Achieving a sustainable business advantage requires that decision makers
understand the true competitive and functional impact of time expenditures. The
vital, but often unrealized, need for realistic time data can be embraced to
create tools for change and growth. While mediocre companies look at their
businesses in the same old ways, skilled competitors wield the advantage of
time, leaving their rivals hopelessly behind.