Agency timesheets: the necessary evil
In recent times, some smaller agencies have scrapped timesheets or have never adopted them at all. Timesheets have always been unpopular with staff. That is to be expected when they are having to meet multiple deadlines whilst at the same time be expected to record all of their time. The decline of by the hour billing and the trend towards value-based pricing has added to the demise of timesheets. In this article, I discuss why agencies cannot afford to be without timesheets and how you can encourage honest, accurate and timely completion of them to ensure they serve their purpose.
Measuring job cost and profitability
Many against timesheets argue that recording time doesn’t change direct labour costs and that you’re not necessarily selling time but an outcome. That may be true but tracking time is not about that, it is about analysing what value of direct salary cost is being spent against fee income for each project. The profit and loss statement will tell the story for the agency but the job-by-job detail informs us which work makes good returns or not. Learning from time cost and profitability analysis of past work is critical for improving future project commercials. Even when work is charged to a client on the perceived value rather than cost plus, the agency should still estimate hours and roles at quotation to confirm that it will deliver the required margin and then review time costs once work is complete to confirm.
Smaller agencies not completing timesheets may say that their team have an internal wash-up meeting on the completion of each project to understand how well it went and what could be improved for the future. Whilst this is good practice and should be encouraged, it can become difficult for senior leaders to track as the headcount and number of concurrent projects increase. More importantly, wash ups do not tell you how profitable the work was.
“If you can’t measure it, you can’t manage it.” – Peter Drucker
Time completion also allows an agency to analyse data on individual members of staff. This data allows us to see what staff have spent their time working on, how many billable hours they are completing, their utilisation rates and what they are spending their internal time on. It also tells us who is regularly working beyond their hours and where extra resource is needed. Staff often don’t realise that completing timesheets can be in their own best interests.
The quality of time completion
Utilisation and profitability reports are only as reliable as the data inputted. Without honest and accurate time entry, a false picture can be painted to senior leaders of how client work is performing. This may not become obvious until the P&L is produced and reviewed, telling a very different story to the profitability reports. When reconciling hours and discussing additional fees with clients, it helps to have time entry data that can be relied on.
These are the two main causes of inaccurate time entry.
Leaving it late
Staff can often be guilty of leaving their time entries so late that they end up guessing what they have worked on. Time is wasted as they search through their calendar, messages, emails and files to see what was worked on and when. To compensate for not knowing, more time may be posted to internal tasks causing their own utilisation rates to suffer whilst job profitability is exaggerated due to missing time. Another side-effect of time not being entered regularly is that the burn rate of a project cannot be tracked in real-time. By the time anyone is aware that the job is going well off budget, it can be far too late to take corrective action.
When team members know a project is going to exceed budget, there is a tendency for time to be dumped onto jobs that are known to be very profitable, already making a severe loss or to internal jobs. Staff typically do this because they feel they will be held responsible for unprofitable work but jobs can be destined to be unprofitable from the outset. Reasons for this can include projects being under-priced, under-scoped or using more expensive resource than budget allows. The true cause may never come to light without accurate time entries.
Encouraging timely and accurate time entry
Staff may not know the purpose of timesheets which adds to the feeling that completing them is just a nuisance and burden. Helping staff to understand that timesheets are to the benefit of both them and the business will at least rid them of some of those ill feelings. I know it would have been to my benefit as a lowly trainee in an accountancy practice to understand their purpose.
Having days or weeks of time to enter can be overwhelming and off putting. Staff need to be encouraged to post time as little and often as possible, preferably throughout their day but by the end of a day as a minimum.
It has been known for staff to be punished for late completion of timesheets. Examples are social media or web access being blocked, expense payments withheld and fines being deducted from bonus payments. However, neuroscience studies suggest that rewards are a more motivating way to get staff to act rather than punishment which is better for deterrence of behaviours. Parenting books I have read have said the same and I confirm that reward strategies have been more effective in motivating my children to get their tasks done! Rewards for staff completing timesheets on time can include offering weekly Friday drinks (there are agencies which have a fridge that unlocks at 100% time completion!) and including a timesheet completion KPI as part of performance related rewards.
Staff buy-in can be improved by influence from the top down. The most senior figures should be communicating and promoting the purpose and importance of timesheets, emphasising that they aren’t used to apportion blame but for understanding and learning. Of equal importance is that senior management are seen to be completing their own timesheets on time, especially where they are billable.
Making timesheet completion easier
In the age of user-friendly cloud software, smartphones and apps, the excuses for non-completion of yesteryear can be made redundant. Time entry can be made anywhere there is an internet connection. The software should be capable of being setup to regularly send friendly reminders to colleagues about incomplete time entries.
The thinking needs to be taken out of timesheet entry. Exhaustive lists of phases and tasks creates too much thought and judgement, leading to wasted time and inconsistent entries. It should be considered what really needs to be captured and analysed when setting up a billable job.
Time entries needn’t be exact but posted in blocks of 15 to 30 minutes. The data is used for internal interpretation and decision making only, therefore it needs to be reliable rather than precise.
Timesheets will always be a controversial subject but the data they provide allows profitability and employee metrics to be understood which can, in turn, improve future project profitability. Changing your team's perception of timesheets and making it easier for them to enter time should enable regular, timely and accurate time recording.
Please get in touch if you need advice on timesheet and job costing systems or timesheet strategy.