Time and resource management are crucial business fundamentals, not only from a functional point of view, but also from a financial perspective. For entrepreneurs and owners of small businesses, knowing how much their time is worth and how much time each task consumes is critical. However, could inefficient time tracking strategies themselves be costing you money, and how can you avoid this situation?
Why time tracking matters for small businesses
For service businesses, time tracking is directly linked to profitability. When you track how many hours you or your staff members spend on a task, you get a clear picture of costs and overheads – and also, where efficiency savings can be made and productivity increased. With this information, you can determine the real cost of your work, compare it to your fees, and see whether you’re generating income, breaking even, or losing money.
Accurate time tracking also provides crucial business intelligence when making targeted investment decisions – such as whether to invest in automation – and the ROI you should expect from your expenditure.
So, what could go wrong with time tracking?
When it comes to multi-level services involving various team members, departments, and contractors – as is typical in an IT Managed Service Provider (MSP) business model – time tracking is not always straightforward. Without a centralized data repository, it is easy to underestimate costs or overestimate your profit margin, leading to inaccuracies that undermine your pricing strategy.
Furthermore, without an accurate picture of how much time is being spent and on which tasks, you could be getting your investment priorities wrong. For example, you could be spending money on automating the most time-consuming tasks even if they’re low value, reducing your ability to invest in tasks that yield more valuable returns.
Better resource allocation
Using a unified service delivery, time tracking, and billing software platform, such as BILLWAZE, can expose patterns of wastage, inefficiencies, and pinch points that reduce the value of your time. Let’s take IT consulting projects as an example. A solution that offers complete time tracking for software developers can show how much time is going into research, client communication, project management, and invoicing – with a full breakdown of related costs and a clear roadmap for efficiency and productivity improvements.
If any of these areas require disproportionately more time than expected, or if the time used to handle those tasks is increasing, this could be a sign that you need to review your processes and workflows or allocate more resources to high-demand tasks. This could also signal that staff don’t have the knowledge or tools needed to their job efficiently, which could be addressed with more training.
Sets the basis for growth
Lacking an efficiency-focused time tracking solution could also affect the long-term success of your business. Without accurate and relevant time/cost management insights, it may be difficult to forecast sales demand and to commit sufficient resources to growth and investment. It is also possible to underestimate your time capacity and human resources, leading to missed sales opportunities.
Price intelligently
Meaningful time tracking helps you understand if your work is profitable, or if you’re falling short of the margins you could be achieving with your time. If the numbers don’t add up, time tracking insights can be used to adjust your pricing and resource allocation based on real costs and actual time frames.
With those insights, you can implement a more profitable pricing structure, whether that means by the hour, per project, or value-based pricing. Not only that, but some solutions feature time tracking software for billing, too, so you can automatically turn billable services into invoices – cutting the length of your invoice cycle and improving your cash flow.
Better cost control and profitability with BILLWAZE
Getting time tracking right and doing so from the start can provide a solid foundation for freelancers or small business and pave the road for growth. The BILLWAZE timer will keep track of all the time spent working on your clients, and automatically bill that time into your invoices.
Get in touch to find out more – BILLWAZE is more than just a time tracking tool, it’s a complete platform that simplifies invoicing and managing your business.
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