By Rieva Lesonsky, CEO of GrowBiz Media & SmallBizDaily.com
Running a small business isn’t easy, especially when it comes to ongoing challenges like maximizing your profit margins. To overcome this challenge, you could look for ways to cut costs in your business, such as reducing waste and negotiating discounts from vendors. You could also raise your prices, although it might cause pushback from customers and clients. Fortunately, there’s an easy way to increase your profitability without taking either of these steps: tracking employee time more accurately.
Labor expenses are among the biggest costs for many small businesses, yet they’re the easiest to underestimate. Do your employees sometimes forget to clock in and out? Do they neglect to fill out their timesheets until the end of the week? If so, you’re not getting an accurate read on how much work they’re actually putting in.
How time tracking software boosts profits, not prices
More accurate and detailed time tracking can help your business in more profit-boosting ways than one:
- It can reveal if you are undercharging or overcharging your clients.
- It can show that your employees are being paid correctly for their hours.
- It can help you reduce overtime and keep your payroll more predictable and manageable.
- It can help you determine which customers, services, or products are the most profitable for your business.
The problem with paper
If you and your employees are still tracking time on paper or manually inputting time worked into a spreadsheet, you’re wasting time that could be better spent in more profitable ways. When you’re busy with work, it’s hard to remember to stop and jot down what you’re working on for what customer at which time. After all, most of us spend the majority of our time multitasking.
At the end of the day, you and your employees probably end up making rough estimates of how much time you spent on a particular client or job — estimates that can be wildly inaccurate. Not to mention, you lose time looking at your calendar, retracing your steps, and mentally reconstructing your day.
Choosing the right solution for your business
So how can you make sure you have the right solution for your business? First, the solution should be cloud-based, but it should also come with a host of features that make your job easier. You chosen solution should:
- Have a mobile app that’s compatible with all devices, so you and your employees can use it anywhere.
- Integrate with your accounting and payroll software so you don’t have to manually enter any time data.
- Allow you to customize time tracking settings to the level of detail you need, recording time spent on different clients, different projects, and different tasks within larger projects.
- Offer reporting features you can use to analyze how you and your employees’ time is being spent.
If your employees are reluctant to switch to a cloud-based time tracking method, here’s how to sweeten the pot: Point out that when hours worked are completely accurate and automatically uploaded to your payroll system, they can feel confident they’re getting paid for every second they work. Employees will also be sure they’re getting the correct pay if they work overtime or have to take a sick day.
If the accuracy of your current time tracking system is dependant on memory, there’s a good chance employees are underestimating the amount of time they spend on each job, which means employees can get paid more when you track time more accurately. (Of course, if you find out a few employees are wildly overestimating their time worked, that’s good to know too.)
Getting the most from cloud-based time tracking
After you use your new time tracking system for at least a full pay period, use your reporting features to compare billable hours to the previous pay period. In most cases, you’ll discover you’re underbilling clients. Billing more, thanks to accurate time tracking, can increase your revenue and profits.
Better yet, the time you and your team used to spend on manually tracking time, inputting data, and reconciling numbers is now yours to spend on more valuable tasks, like acquiring more customers.
Rieva Lesonsky is the CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at firstname.lastname@example.org, follow her on Google+ and Twitter, and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for free TrendCast reports.