Why time tracking is essential for your business success

Time tracking is a critical tool for any business looking to accurately determine operational costs. It provides clear insights into labour allocation, highlights inefficiencies, and supports better financial forecasting. By understanding exactly where time is being spent, businesses can refine their operations, price services competitively, and build stronger relationships with clients.

You may initially think that time tracking is tedious, but with the right software tailored to your needs, it can seamlessly blend into the background. The value it brings is undeniable. For instance, how can your sales team focus on the right type of deals if you don’t truly know how much each sale costs?

To illustrate this, let’s explore an example on how short-term, ad-hoc time tracking can reveal crucial insights into making a profitable sale.

Case Study: The Cost of Hidden Freebies

Meet Jonathan and Paula, co-owners of an agency. Paula is responsible for sales and loves sweetening deals by offering low-cost or free services, such as “Case Study Audits.” Jonathan, who oversees the delivery team, estimates these audits take 20 hours per month on top of the client’s confirmed 90-hour package.

While Paula is pleased with closing the deal, Jonathan suspects that these freebies are hurting profitability. To confirm this, he decides to track time for a month.

Here’s the breakdown:

Time Spent on the Core Service (90-hour package)

• Manager 1: £22/hr for 2 hours = £44/month
• Staff Member 2: £15/hr for 22 hours = £330/month
• Staff Member 3: £15/hr for 21 hours = £315/month
• Staff Member 4: £12/hr for 15 hours = £180/month
• Staff Member 5: £12/hr for 30 hours = £360/month

Total people cost for the 90-hour package: £1,229/month

Time Spent on the Free Case Study Audit (20 hours/month)

• Staff Member 3: £15/hr for 2 hours = £30
• Staff Member 4: £12/hr for 5 hours = £60

Total people cost for the audit: £90/month

Total Delivery Cost of Service & Freebie £1,319

When combining the core service with the free audit, the total people cost rises to £1,319/month, but the client is only paying for the original package. This results in a £69 loss, excluding other overheads like software, equipment, and downtime.

This is a simplistic view, but it highlights a crucial point: securing a sale is not as important as securing a profitable sale. By using time tracking, Jonathan was able to identify how a “freebie” was impacting the bottom line, what Paula was seeing a small £69 a month freebie actually equates to £828 loss per year per year which is a 5% loss on that client.

How to Get Started with Time Tracking

Now that you’ve seen the importance of tracking time, where should you begin? There are many time-tracking solutions available, and it’s essential to find one that fits your business needs.

For micro-businesses, tools like Toggl are fantastic. But for teams, you need something more robust. Many of my clients use Hive to track time, and the feedback has been overwhelmingly positive.

With Hive, you can log time as you work on tasks, keeping your team organised and focused. It also offers insightful reports for managers to assess efficiency.

Hive also allows you to see data at the client, project, and task level, as well as individual or team performance. Plus, with its QuickBooks integration and upcoming Xero integration, you’ll soon be able to invoice clients directly from the time-tracked data—perfect for those who want to provide detailed time reports with their invoices.

Time tracking isn’t just about knowing where the hours go; it’s about understanding the real cost of your services. Without this insight, you risk under-pricing your offerings and losing profitability. The right time-tracking tool can not only improve your operational efficiency but also help you make smarter business decisions, leading to more profitable sales.

I’ll be sharing more on cost of service in upcoming blogs and posts so make sure to follow the page to be kept up to date!

To try Hive use this link:https://get.hive.com/zvnujkllbh3g