In our increasingly computerized society, the business of tracking time is an important one. Time tracking lets employees and employers keep an accurate account of the time spent on specific tasks, making billing and payroll simpler; it also helps project managers plan and budget more effectively.
But time tracking isn’t one-size-fits-all. You can track in and out hours, time blocks, particular projects, or a combination of all three. And the choice of method you use depends on your work habits, the nature of your work, and what other tools and software you’re using.
In this article, we’ll explore some of the most popular ways to track time, as well as some tips on how to make time tracking work for you. We’ll then talk about why in and out hours is the method preferred by most businesses, as well as some simple ways to get started.
The different ways of tracking time
As a business, there are several types of project possibilities — some projects might be billable by the hour, some may have a set price for the entire project, and some may involve a combination of both.
In order to best track time spent on different types of work, it’s important to understand the different ways that time can be tracked. At present, the most popular are three forms: in and out hours, time blocking, and project-based billing. We’ll go into detail on each below.
In and out hours
In an in/out hours tracking system, you simply track the time you begin work and the time you stop. This type of system is best for employees who have a set work schedule, or for people who work on tasks that can be easily broken down into specific start and end times.
In/out hours tracking can be done with a manual time sheet, or with time tracking software. Time tracking software can automatically calculate the total hours worked for the day, week, or month, and use that to integrate with your billing to improve the efficiency of your workflow.
If you’re using an in/out hours tracking system, it’s important to get employees in the habit of tracking their breaks as well. Breaks may or may not be billable, but they are important for the mental and physical health of your team, so make sure they’re being logged.
Time block tracking is similar to in/out hours, but instead of tracking start and end times, you track the amount of time spent on a particular task or project. This type of system is best for people who work on multiple tasks throughout the day with variable break times in between, and is increasingly being used with work-from-home configurations.
With time block tracking, your employee might track that you worked for two hours on a project in the morning, one hour on lunch, and then another three hours in the evening. The total would be six hours for the day. Time block tracking can also be done manually or with software; software is especially helpful in compiling data for reports and invoices.
If you’re using time block tracking, it’s important to be realistic about how much time different tasks will take. You don’t want your team to overbook themselves and then not be able to finish a project on time. Delivering clear estimates before work begins is essential when delegating using this strategy, and the side effect is you’ll be able to track the quality of your time estimates as well.
In project-based billing, primarily used with contractors, your staff charges by-project, regardless of how many hours it takes to complete. In contrast with hourly-based billing, this system encourages employees to complete tasks as quickly as possible so they can move on to the next project and make more money.
This can be good or bad; because your staff members try to finish their tasks as quickly as possible, they may be less likely to take the time to do a good job. In order for this system to be effective, it’s important that you have a good contract and expectations in place that outline what is and isn’t included in the project. On the flipside, this can also align the self-interests of the contractor and client, as both parties are trying to get the most value they can from the project.
Project-based billing is significantly simpler than in and out hours or time blocking because it doesn’t require contractors to track their time in any specific way. The project manager can simply keep track of the different tasks completed and when they were completed, and the contractor can send an invoice at the end of the project or on a fixed schedule (weekly, biweekly, or monthly).
Which mode of tracking is right for my business?
Short answer: in and out hours are often most preferred, simply because they are the easiest to track and manage.
Long answer: it really depends. We’ll explore some reasons why below.
Why in and out hours make sense, and the types of businesses that benefit the most
Generally speaking, businesses that benefit from time tracking are those that bill their clients by the hour. This is because it allows for very simple calculation of margins; for example, if an employee billed at $10/hour spends two hours on a task that is billed at $50/hour, the business profits $80 on that task — the revenue is five times the cost of the employee’s time.
Today, that’s everything from digital marketing agency to software development to law firms. Any companies that embrace agile methodology — the notion of accomplishing as much quality work as possible in as little time — benefits tremendously. Time tracking is an essential piece of their billing process, and it’s also a way for them to measure employee productivity (and how it changes due to controllable factors).
But it’s not just businesses with hourly rates that can benefit from time tracking; businesses with set prices for services can also use time tracking as a way to measure efficiency and productivity. Though not as straightforward, this information is still valuable for making decisions about staffing, pricing, and other strategic initiatives.
Some other businesses that often use in and out hours include:
- Business services
- Temporary staffing
Which businesses benefit from time-blocking?
Time-blocking most often benefits businesses without fixed work schedules. For example, if you are a consultant who works with clients on an as-needed basis, time blocks can be very helpful. This is because you don’t ‘log on’ at the beginning of the work day and ‘log off’ at the end — your performance is based on when the client needs you. This allows you to track how much time was spent on which project and client, making invoicing simpler.
Similarly, people who work from home can use time-blocking to measure how much time was spent on which task. For example, if you’re a writer, you might track how many hours you spend writing each day for your publication. This can help you understand when you are most productive and make adjustments accordingly using time management techniques.
Time-blocking can also be helpful for companies whose employees have multiple tasks to do during the day. For example, you may want to track how much time they spend on email, social media marketing, and phone calls so that you can make better use of their time.
Some additional businesses that use time blocking include:
- Content writers
- Ad-hoc (retainer-based) graphic or website designers
- Lawyers and mobile law-firms
Businesses that thrive with project-based billing
Lastly, businesses that work on a project-basis include consultants, graphic designers, and other professionals who often have a flat fee for their services. With over 30% of Americans saying they’ve been self-employed at some point during 2020, understanding project-based billing is crucial to growth.
In this case, time tracking is less about the number of hours spent on the project and more about ensuring that the project is completed within the agreed-upon timeframe and budget — and paying employees the same way can often simplify your margin calculations.
Similarly to how simple it is for businesses that work for an hourly rate to pay their employees by the hour, businesses with project-based billing that choose to pay their contractors a project-based salary simply subtract the total project budget by the contractor project budget to determine the profit — or loss — on the project.
Some other organizations that frequently employ project based billing include:
- Advertising firms
- IT consultants
- M&A advisors
- Expensive consultants
In and out hours: final thoughts
Is your business in need of a more accurate way to calculate margins? In and out hours may be the answer. With a society that is increasingly focused on productivity, understanding how you track results can help push you to success.
Whether your business bills hourly, or by task, time tracking is an important piece of the puzzle. By understanding how you track time, you can better understand your productivity and make changes where necessary.