Billing by the hour is fairly common for certain industries. When I worked for a public accounting firm, I had to track my hours so the firm could bill accordingly. Now that I have my own business, I try to avoid that practice by charging flat fees for my services, but certain situations still call for billing by the hour.
Why do we hate tracking our time so much? Because it feels like it takes much more time to keep track of your hours than to complete a project. If you are in business for yourself, then you can easily see the value in time-tracking. But for your employees, it can be difficult.
Therefore, you want to make time-tracking as convenient and easy as possible for your employees and yourself. To do so, first develop a system to track time. If you have QuickBooks Online, you can set up time entry users, free of charge, and track the hours within your accounting system. This way you won’t have to re-enter the data when it comes time to invoice your clients, it’s already in the system. There are a lot of other programs that can help you track time as well, but make sure it integrates with your accounting system so you don’t waste time later.
Once you have a system in place to track your hours, establish a practice for recording hours. Depending on what you do, it might need to be different for some staff members than others. When I was in public accounting, my firm’s policy was to track time every seven or eight minutes. I thought that was ridiculous, but it worked best for the tax accountants who might spend very little time on several projects a day. I, on the other hand, worked on a few projects for almost the entire day, therefore, that same process was not as efficient.
Here is one technique that worked for me. Because I only worked on a few projects each day, I would track how many total hours I worked, then prorate my time based on which clients I spent the most time on. For example, I may have spent half of my time that day on Client A, 30% on Client B and 20% on Client C. It was an educated guess–there is no way you can be 100% accurate when tracking your time–but this technique worked very well for me and was not overly daunting when it came time to enter my time.
While charging by the hour sounds great in theory, I worry that some of my clients are short-changing themselves. If you charge by the hour, what is your policy on travel time? What about the time you spend answering emails and phone calls? Are you really tracking all that time, or are you comping your clients for those minutes? If it is the latter, does your hourly rate reflect that?
If you do not charge your clients for travel time, phone and email communication or the time you are thinking about their work when running errands, then you need to increase your hourly rate or add a base couple of hours to your monthly bills. This is time you could be doing something else, and you should be compensated for it. This is one of the reasons I now charge a flat fee for my services. I am always thinking about clients, and I can not charge them for that time, nor do I even know how to track that time. So, instead of raising my rate to a level where I might price myself out of the market, I just charge for the task instead.
As an alternative, you can communicate with your clients that they will be charged for your travel time and/or a weekly amount for communications and still continue to charge your hourly rate for all other work performed.
All this being said, it is important to document how you want to track your time and that of your employees, and communicate it with them and your clients. Tell your clients you charge in 15-minute increments. Tell your employees that all time has to be entered daily and has to be approved by a manager before they are paid. Make sure that all the correct information is attached to each time entry–such as customer, task performed and date.
Tracking your time does not have to be a daunting task. It is all about setting up a system that works best for you and your business, and then communicating that system to all involved. Without proper planning and implementation, you could be losing out on money you deserve.