©2011-2023 Less Accounting
Menu
Why are you even working if you’re not billing your hours? Until you know how many hours a week you work, you’ll never know how much you’re actually getting paid. It could be five dollars an hour or five hundred. To learn how much your time is worth, you absolutely need to track your time. Fortunately for you, it doesn’t have to be painful. Here’s the how and why behind tracking your billable hours.
People keep track of their time for all kinds of reasons. Whether you’re looking to be more productive or save your company some money will guide which method of time tracking you choose. If you decide on a goal in advance of picking a system, you’ll be able to use it much more thoughtfully and effectively. For example, if you’re trying to save money, then you won’t need to track every single minute of every single day like a person interested in productivity would need to do. Marcus Neto of BlueFish Design Studio says“If you’re not tracking billable hours you’re losing money.”
If you manage multiple clients, not only do you need to how much you are working as a whole, but also which clients are taking up the majority of your time. From there you can decide how detailed your time tracking needs to be. For some clients, it may be worth the extra effort to track specific projects too. This can help you negotiate your contract if needed.
Tracking billable hours also helps you understand how cost-effective a project was. Did it take too much time? Were you hung up on menial tasks when your time could have been better spent elsewhere? Then decide if you want to take more work like this one or if there is a way to improve your processes for the next project.
One of the biggest struggles early freelancers face is what to charge. Tracking your hours is the best way to gain an understanding of two things: 1. how long certain tasks take and 2. if you have the time to add new clients. Take this information as part of your evaluation that you are charging a fair rate for yourself.
Even today with all our smartphones and tablet computers, pen and paper can be the most efficient system. A small notebook and pen are always with you and don’t run out of batteries. When combined with a reasonably accurate timepiece, you’ve got a system that will always work. Simply write down what you’re doing throughout the day and note whether it’s billable or non-billable. If you’re so inclined, you can later enter all the data into a spreadsheet for further perusal.
Speaking of spreadsheets, these make an excellent way to track time. Just like a notebook, you’ll type in your starting and stopping times, along with whatever project you were working on. Working from a spreadsheet lets you perform calculations and figure out total billable hours right then and there. You can even set up different sheets for different clients. When a client needs an invoice, you’ll have all the information you need right there at your fingertips.
Want a step-by-step guide to setting up a simple spreadsheet in Excel? Read more here.
Google Sheets fan? Find a time-keeping template here.
If you’ve touched a computer in the last five years, you can figure out how to use one of the dozens of time tracking apps you can get for your computer. The simplest ones literally have two buttons: Start and stop. Press one when you start working, and press the other when you’re done. Other apps, such as Hubstaff, have fancy features that calculate your hourly pay for you or let you split your time into different projects. You probably won’t use all these features, but sometimes they can be nice..
Here are our top five favorite time tracking apps:
All of these apps have free versions with limited capabilities, so you can test out what works best for you.
(Note from LessAccounting: Pst, check out our time tracking application. It’s a time tracking app brought to you by the guys at LessEverything with those simple “Start” and “Stop” buttons. You even get a free account with every paid LessAccounting account, and the 2 integrate seamlessly so you can create invoices from your timesheets!)
You may find that some sources say that charging hourly actually disincentivizes your productivity. BUT understanding how much time it takes you to complete certain tasks is crucial to discovering the value of your time. If you want to charge a per-project rate, you can take what you know about your hourly rate and productivity and present a rate that will cover your time and resources.
Non-billable time is time spent doing tasks that your business has to swallow the costs. These tasks cannot be assigned to a specific client. The tasks will vary based on your type of business. For example, it could be: drafting proposals, networking, education, or team meetings. Should you record non-billable time? If you get to the end of the workweek and you are wondering where your time went, it may be worth tracking ALL your tasks for a time. This could help you identify tasks that are either wasting time or could be outsourced to someone so you can take on more client work.
You could spend forever waffling over which system to choose. You could also just pick one and be done with it. Try your newly-chosen system out for a few weeks and see how you like it. If you can’t stand it, or you always forget to press the little buttons, or you need a mobile component, then ditch it and move on to a new one.
Tracking your client or customer billed hours can be useful in so many different ways. Not only can it help your company save money, it’ll also help you be more productive. There’s nothing like monitoring time to show you how much of it you’ve been wasting.
Check out these articles that can help you streamline your operations and services.
How to Start a Freelancing Business
Simplifying small business bookkeeping since 2011.
©2011-2023 Less Accounting