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The Complete Guide
to Time Tracking

Historically, time-tracking has been being used as the simplest way to measure work and calculate payments. In today’s world, it is often used as a source of essential data on how work is performed, what can be improved, and what trends of the work process require closer attention. Advanced time tracker tools are used for collection and analysis of this vital information.

In this guide, we’ll take a look at the evolution of timekeeping methods and purposes, its current trends, and benefits that modern time-tracking tools and techniques can bring to companies, teams and benefits of timekeeping.

Chapter 1: History of time-tracking

Counting time spent on work has been one of the most popular ways to measure performance and, subsequently, calculate payments. Already in the ancient Egypt, the Hammurabi’s code established minimum wages for workers. Some of them were calculated per days, months and years; some were paid per work done. The wages depended on professions and types of work: a doctor’s wage was higher than a field worker’s.

Egyptian workers received their salaries in meals, as the economy was based on redistribution of goods. On clay tablets, the “payrolls” of the ancient times, workers’ daily wages were recorded in cuneiform writing: bread, grain, radishes and even beer.

Did you now try to calculate how much you’ve earned today in beer equivalent?

ancient payroll

As industrial technology advanced, time-tracking became a necessity. The famous Benjamin Franklin’s phrase, “Time is money”, is probably the best description of the relationship between employees and employers starting from the Industrial Revolution. And, as time recording technology advanced, time-tracking methods developed.

In 1888, Willard Le Grand Bundy, a jeweler from New York, invented time clock, a machine that recorded hours worked by the employees. Since then, many companies, mostly in the manufacturing field, have been using similar machines to manage attendance and calculate hours worked by their employees.

Like any other device, first time clocks were bulky and hard to use – both for employee and employer: they involved lots of manual work that required focus and attention. The employee had to insert their card to the machine and get a time stamp, and the employer then needed to collect cards and track time records.

time clock cards

Not surprisingly, it led to errors and consumed enormous amounts of time. Today’s attendance tracking systems help avoid this: they use biometric data, RFID tags and other technologies to automate data processing and prevent such types of fraud as “buddy clock-in”.

Time clock only works for those fields where attendance is the key. In many fields today, the number of worked hours is crucial for client billing and payroll calculation. But that was not always the case: the history of detailed timekeeping began in the early 20th century, when Reginald Heber Smith introduced the paper timesheet.

Law was the first business area where timesheets were introduced. First timesheets were ruled rectangles, divided in six-minute increments. Lawyers were required to write there their client’s name, time they spent on the case, and task description for each day. And, of course, it involved a long and cumbersome process of calculating billable amounts based on the collected time records.

lawyer time tracking

Timesheets that allowed account for literally every minute represented the mentality that professionals sold their time – not a product and not a skill. Some argued that this system served “time sellers” only and no buyer ever asked for the billable hour system, but eventually this model was accepted as more fair and transparent than any other.

However, the idea of selling time did not propagate quickly. Only in the 1950s, the American Bar Association issued a pamphlet called “The 1958 Lawyer and His 1938 Dollar” that promoted billable hours for lawyers in order to increase their income. After that, the idea of billable hour started replacing fixed fees first in law and later in consultancy and other fields.

Today’s timesheets are used in architecture, construction, law, IT services, and many other fields. Paper timesheets have been replaced by electronic systems that automate timekeeping, help avoid calculation errors, and include additional functionality that provides managers and company owners with vital business data.

Chapter 2: The Benefits of Time-Tracking

If you don’t bill your customers by hour, you’re not required to fill in timesheets, right? However, many companies that use fixed fees instead of hourly rates, still include timekeeping in their work process. Why?

As we already mentioned, timesheets provide management with essential data and insights on business processes and productivity dynamics within teams. What’s more, timekeeping also has benefits for personal performance of each employee.

Worked hours are listed among 10 key business metrics, as they allow to understand current processes and important trends in the team. Among its effects on project management and communication with customers, the following are worth mentioning:

Clarity
Clarity and transparency
Timesheet data is accurate and easily accessible. The ability to group it by various parameters allows to quickly review results for any time period.
Data
Traceability of all data
Time-track data can be quickly reviewed and summarized in the reports. This way, it can easily be used for justification of costs or time expenses.
Estimations
Improvement of estimation techniques
By comparing set deadlines and estimates with actual results, it’s easier to make future estimations more accurate.
Table
Better planning for future workloads
Timesheet data helps recognize and prevent unexpected time leaks, workflow bottlenecks, and overstaffing / understaffing problems.
Payroll
Accurate billing & payroll data
Having exact data on how much time has been spent for the project helps avoid the common problem of under-billing customers.

Just having that data is, however, not enough. Its careful analysis is necessary to make the right conclusions and decisions. Summarized time-track data reveals the full picture of our time expenses, performance, and workday breakdown. By comparing similar data for current and previous periods, it’s easier to understand important trends and see work dynamics. This information helps understand possible weak points and increase productivity and efficiency.

Speaking of productivity, keeping track of worked hours helps improve individual results. Here’s a list of its major effects on individual performance.

  • Beating procrastination. Being aware of how much time you normally spend on your daily tasks and on things that distract you from work is a real help in quitting major distractions. It’s much easier to stop checking social media every 10 minutes and watching fun videos on the Internet when you learn how much time exactly you spent on Facebook and YouTube yesterday.
  • Understanding your productivity. Timesheet data is the most important source of information when calculating and understanding productivity, performance and work results. Productivity metrics are usually unclear in the knowledge-based economy, but work time statistics as its clearest and most understandable component provide an insight into it.
  • Keeping track of your progress. Tracking work time is an efficient way to increase productivity, especially for self-employed individuals who define themselves what to do throughout the workday and tend to experience severe procrastination problems. Did you ever wonder what useful things you could do instead of watching TV shows and YouTube videos? Actually, there are so many of them – we’ve even done a research on this.

As informative as time-track data can be for managers and business owners, some companies still prefer not to introduce this practice in their workflow. Some of the reasons why they choose not to keep track of time spent on work are:

  • It is cumbersome and requires too much effort;
  • It consumes too much time and slows down the team;
  • Employees feel like they’re micromanaged;
  • People forget to fill in timesheets anyway.

Does any of this sound familiar to you and your team? Actually, these reasons indicate that the time-tracking procedure needs improvement. Adopting a convenient tool for time-tracking and developing better timekeeping habits creates positive experience of time-tracking and allows to collect necessary data without spending too much effort or facing negative effects on the work environment.

To sum up, timekeeping provides companies, teams and individuals with essential data, helps in planning and forecasting, and improve overall work results. Two crucial factors here are organizing the process properly and making sure that the employees understand why keeping track of time spent on work is important for everyone.

Chapter 3: Using Time Tracking Data for Your Business

Well, we’ve figured out that time-tracking brings a lot of benefits for each employee individually and for the entire team or company. So how to get the most value out of time-tracking data and what exactly can be achieved, improved and amended in your company’s work?

Below, we’ve listed the most common problems that managers and employees face in their workflow, solutions that time-tracking data can provide, and positive changes that it brings to the work process.

Automating and increasing accuracy

Problem: Too much manual work, which results in calculation errors
Solution: Process data automatically and get accurate figures in less time

Collected timesheet data allows getting accurate calculations of billable totals and payroll amounts. Automating their calculation helps not only free up employees’ time, but also avoid possible errors. This brings benefits for all parties of the work process:

  • Companies that bill for their work on the basis of timesheet data: they don’t get under-billed;
  • Customers that pay for the services by hour: they have a clear and transparent picture of what exactly they’re paying for. This also helps improve relationships with customers, as it adds clarity and transparency to the cooperation;
  • Accountants: they spend less time on manual data processing.

Simplifying procedures

Problem: Cumbersome time-off management procedure
Solution: Manage leaves and compensations efficiently with your time-tracking tool.

If your timekeeping software allows to record both work and leave time, it can turn into a helpful tool for leave management. Keeping leave balance values up-to-date after regular accruals, manual adjustments and spent leave time is another task where automation not only saves time, but also increases accuracy of resulting data.

Exact data on overtime and overworked hours also simplifies calculation of overtime payments or compensatory time. This also applies to salaried employees, whose payments don’t depend on hours spent on a work assignment.

Make sure that your time-tracking tool allows keeping record of leaves and time off and, ideally, has a built-in module for calculation of time off balances.

Making important data transparent

Problem: Lack of transparency in time and payment calculations
Solution: Get transparent data on work and leave time

Clear calculations of working hours, overtime, and leave balances is another advantage of using time-tracking data for team management. Fair and transparent rules for payments and time off accrual create a healthy work environment.

Better planning and forecasting

Problem: Estimation errors, poor planning
Solution: Using previous data to increase estimation accuracy

It’s hard to get an accurate estimate for a task you never performed before, but using previous data for estimation of similar tasks dramatically increases accuracy of new estimates. This contributes efficiency of work management and helps better plan for future. Besides, the full picture of time actually worked allows to detect and avoid previous workflow drawbacks.

Below are listed some ways to use time-track data for planning capacities and workloads.

  • Compare estimates and actual data for previous periods to see where estimates went wrong and why;
  • Use actual figures for previously performed works as a ballpark figure for future estimates for similar tasks;
  • Analyze overtime data and compare scheduled and actually worked hours to see if there are overstaffing or understaffing problems in any parts of the workflow;
  • If your time-tracking tool allows to record leave time, see future capacity of your team and understand how much work can be accomplished in specific periods of time.

Obviously, time-track data for previous periods isn’t the “all-in-one” solution to achieve accurate estimating and realistic planning. Only typical tasks can be estimated on the basis of past results, and unpredictable things happen. So it’s important to allow time for them and to monitor the estimated/ actual time proportion in the course of project work.

Seeing the big picture

Problem: Difficult calculation of profit/loss
Solution: Understanding profitability of your work with exact time data

How to measure the value of your time? As easy as it can seem, calculating the resulting profit of your work is not that easy when calculations need to be done manually. And in big teams, it can literally turn into an accounting nightmare.

That is why it’s reasonable to consider using a time-tracking tool that has cost & billing functionality to account for the company’s internal expenses and project-related revenue.

Some argue that having time-track data at hand tasks doesn’t help understand the profitability at all, as you know anyway how much time you need to accomplish an assignment. What’s important here is the difference between a rough estimate and the exact data, automatically calculated by the time-tracking tool and compiled in an informative report.

Improving your results

Problem: Productivity decrease
Solution: Using timesheet data for work on productivity

It has been said a lot about how time tracking helps break the habit to be easily distracted. But how does it work in practice? There are two basic levels where time-tracking data help boost productivity – and here’s how.

On the personal level, time-track summary allows to:

  • Understand where your 8-hour work day goes;
  • Know exactly how much work you’re able to perform throughout any specific period, and know when to say no to additional work;
  • Focus on single activities instead of juggling tasks;
  • Know what assignments take more time and effort, and ask for assistance if necessary.

On the team level, this data helps increase productivity in the following ways:

  • It helps managers understand dynamics by comparing the data with previous periods;
  • It reveals time-consuming tasks that require special time investment;
  • It allows detecting time-wasting activities that impair overall productivity of the team.

And a few more words about additional advantages

Timesheets can work as a proof for specific activities when taking advantage of different privileges. For example, when applying for the R&D tax credit in the US, the company should prove that an essential part of its activities is research, development and innovation.

Time logs are part of the proof records, as they show the detailed breakdown of hours spent on R&D projects. And, as it’s possible to apply for R&D tax credit retroactively for three past years, accurate previous records can be of huge help here.

To sum up, time-tracking data helps optimize work process, get rid of time-consuming manual work, and making basic work procedures more clear and transparent for all participants.

The key to getting the most value out of its results is organizing the process properly. This means choosing an adequate method, selecting the right tool, and implementing the procedure so that it is clear and easy for the employees. Below, we’ll discuss how to achieve that.

Chapter 4: The Methods of Time Tracking

The method of time or attendance tracking that you choose for your team depends on your field, your particular purposes, and common practice. We won't discuss such multipurpose tools as Excel here, because they lack a lot of special features offered by tracking software. Looking for software to track time, be prepared to choose from a wide variety of types. The major defining feature is the way you can enter time.

Systems with swipe cards. At the beginning of each working day employees register their arrival by swiping a badge card against the reader. The same is done when they leave the office. These systems are perfect for registering absence or late attendance.

  • Pros: easy to implement and use.
  • Cons: the system doesn't cover the needs of remote workers and doesn't allow you to record time by tasks and see how exactly the time is being spent.

Clock-in/clock-out systems. These solutions can be rather sophisticated and offer different possibilities of clocking in and out: with special equipment on production site, in the office, by dialing a toll-free phone number, via PC or mobile apps. Some of them even offer special timeclock devices for extreme outdoor conditions, in case they’re used by field workers.

  • Pros: a simple way to track attendance for office employees and field workforce.
  • Cons: the drawback of the previous method also applies here: clock-in/ out systems don’t allow to keep record of details on how time is spent. Besides, they leave the possibility of “buddy clock-in”, when an employee can punch in for a coworker.

Timer systems. The simplest timesheets with timers allow recording total hours worked. To start tracking, an employee simply has to press a button. More complex tools let you allocate time to different job assignments (e.g. projects or tasks).

  • Pros: the result gives a detailed breakdown of work time by tasks and activities. Additionally, no effort at all required to calculate how much time has been spent – the timer counts it automatically.
  • Cons: the problem with this type of timesheets is that users often forget to switch between tasks, so time is recorded incorrectly.

Geolocation/geofencing systems. These solutions are installed on the employee's mobile phone. They make use of GPS monitoring, so that when a worker arrives at a job site, the system performs a punch-in. Some timesheets let you track mileage as well. Needless to say, this type of time-tracker is perfect for companies with field workforce.

  • Pros: exact data on when and where an employee is, plus no possibility for “buddy clock-in”.
  • Cons: employees can feel micromanaged and surveilled when having to use this system. If a geolocation app is installed on the employee’s device, legal issues are possible due to 24/7 location tracking.

Background tracking systems. They are based on desktop monitoring which limits the target audience to office workers. Running in the background, the solution automatically captures time spent on particular tasks. Additional features include taking screenshots and registering keyboard activity.

  • Pros: this method gives detailed data on employee’s activity and allows to detect unauthorized or unwelcomed activities.
  • Cons: most workers won't be comfortable with this type of time and activity tracking, because the Big Brother effect is here at its worst.

Systems with manual recording. A user logs time against a task manually, either as an interval or amount of time. Built-in notifications will remind employees when it's time to fill in the timesheet. They take things a step further with advanced options — such as leave time tracking, overtime and PTO calculation.

  • Pros: the system provides managers with all necessary details about employees’ work time expenses without creating the feeling of being overmanaged and controlled.
  • Cons: people are often reluctant to fill in timesheets or forget to do that, which creates difficulties for management and accounting.

Carefully consider what benefits of a specific time or attendance tracking method are crucial for your purposes and what drawbacks are not acceptable. After that, start choosing the right tool for your team – let’s walk through the most important features that define your final choice.

Chapter 5: Choosing Time Tracking Software for Your Team

1. Select the method

Vendors offer different systems designed for time-tracking, time management, and attendance monitoring. As we showed above, different time-tracking methods can be implemented depending on the company’s needs and employees’ positions. We can divide time-tracking systems into three groups by the method used in them:

  • Punch-in / out method: swipe cards, clock in / out, geofencing systems. Being not exactly time-trackers, rather attendance trackers, these systems record when exactly the employee arrives and leaves. They are mostly used for managing client service teams or organizing shift work, where monitoring attendance and preventing tardiness is crucial.
  • Background capturing method. These systems automatically record all user’s activities on the computer, optionally with taking screenshots and sending them to managers. It’s considered a very efficient tool to increase efficiency and reduce time-wasting activities, but in fact moderation matters. This time-tracking method, when used unduly, can involve severe privacy risks for the employees.
  • Manual tracking method. This method involves manual entry of time spent on specific tasks. The user can type in hours and minutes or start a timer for each performed task to calculate time automatically. Some of these systems include advanced features, such as billing, leave tracking and leave balances calculation, and work management.

When choosing the right method for your company, consider the purpose of time-tracking in your particular case: managing attendance, preventing improper use of work time, or getting detailed data on performed work.

You can also combine time-trackers of any type with other productivity tools to increase individual productivity and teams’ performance. There are many productivity apps available on the market, and you can choose what suits best for your personal purposes or for your team’s performance goals.

2. Consider technical details

Independently of the method used, it is important where the tool and all its data is located. There are several implementation options:

time tracking software types

Today’s trend is online solutions, as they provide better availability and release the staff from all installation, maintenance and upgrade works. However, some still prefer internally hosted software if the company’s internal regulations require to store the data on own servers.

3. Take all features into account

When choosing a time-tracking tool to be used in your company, you need to take into account many aspects. To help you save your time, we made a checklist of features you might consider important.

time tracking software features

4. Consider reasonable costs

The cost of the time-tracking solution is often the crucial factor. Small teams tend to opt for free solutions, but quite often they turn out to be very basic or buggy. Also, many of them require unreasonably big effort when installing and configuring the system. So when comparing prices for available solutions, also consider their resulting cost efficiency for your business.

Although cloud solutions seem to be more expensive than on-premise systems, many companies opt for them, because they don’t require any maintenance efforts. Many vendors include all installation, upgrade and data backup works in the fee, so the software is easy to access and use. Keep this in mind when considering the reasonable costs of a time-tracking system.

For self-employed individuals who don’t need to track team’s working hours, affordable standalone applications are available that work on Windows, Mac OS, or Linux. If you need a very basic solution, you probably should consider using a free browser extension with time-tracking and distraction-blocking functions.

When evaluating costs of implementing a time-tracking tool, not only take into account the price itself, but also consider the benefits that optimization and automation will bring by freeing up employees’ time. Also, make sure you haven’t overlooked any hidden costs, such as costs of technical works and maintenance.

Chapter 6: Don’t Allow It to Go Wrong: Implementing Time Tracking Software

While many companies implement time-tracking, there’s still skepticism about it. Employees consider it yet another office chore, and managers rarely observe positive effects of tracking time. Why?

As we mentioned above, time-tracking only makes sense when implemented properly. Otherwise, it turns into a time-wasting activity, which ruins the very idea of work optimization. Below, we collected some simple but helpful advice on how to organize the process to be efficient.

Communicate your goals

Explain to your team why you’re implementing time-tracking and what is the ideal result of using it in the workflow. People are often reluctant to adopt new procedures – not only because it’s yet another task that needs time and attention, but also because they don’t understand clearly enough what is the purpose of the new activity.

As for time-tracking, there’s another thing that makes people not welcome it: the feeling of being micromanaged. Having to record everything you’ve accomplished and account for every minute of their workday often makes people feel uncomfortable and adds to their reluctance to adopt this practice.

This is why it is essential to explain how the data will be used: it’s not about penalizing people for being too slow or having advanced cyberloafing skills, it’s about optimizing time expenses, or accurate billing and invoicing, or figuring out and getting rid of work process flaws – that depends on your primary purposes.

Explain the benefits

Even when it’s all clear with your goals, many employees would still have the key question: why do I need this to be done? While sometimes it’s about accurate payroll data and timely payments (although those employers who delay payments for turning in a late timesheet are on slippery ground), time-tracking has various positive effects for each of them personally:

  • Having accurate work time data and fairly paid overtime;
  • Being aware of their productivity and being able to predict it for the future;
  • Having a valid reason to say no to more work assignments;
  • Staying organized and focused.

Configure the process to be easy

Ironically, it’s not uncommon that time-tracking involves significant time and effort. If your purpose is optimizing work process for both individuals and teams, make sure that tracking time does not consume too much time.

A few tips on how to achieve that:

  • Select a tool that is easy to get started with and doesn’t require a long and demanding onboarding process;
  • Set up a clear procedure for logging regular hours, overtime, and absences;
  • Explain and clarify the procedure to the employees, and keep it documented;
  • Add some positive motivation to the time-tracking procedure so that your employees do timesheets on time. The exact way to motivate people depends on your field, office culture and team members’ preferences – sometimes things that work are really fun.

Get feedback and improve the process

During the early implementation phase, expect to notice mistakes and gaps not only in the employees’ time-track, but also in the procedure itself. See that not as a sign that time-tracking is not an adequate solution for your problems and purposes, but as an invitation to gather feedback. This step helps you see potential flaws in your implementation of the procedure. Knowing what the problem is, you can make necessary adjustments.

For example, if your colleagues forget to fill in their timesheets, a possible solution is to set up automatic reminders to be sent out to their email address. Or, if they struggle with interfaces, a good idea would be to share documents describing the step-by-step procedure, or have your vendor organize a training session.

If everything seems to be running just fine, it’s still not time to be complacent. Collect feedback from your employees and see what can be improved. That is important to make sure there are no problems being overlooked.

Summary

Throughout the years, time-tracking has evolved from the easiest and generally understandable way to calculate work amounts to a source of vital data, bordering on business intelligence. Today, many special tools are available to organize the time-tracking process and optimize work. They allow collecting data that is helpful for all involved participants: regular employees, managers, and customers. By simplifying data analysis, they also allow getting valuable data with minimum effort.

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