Tracking your time and your employees' time has two major effects on your profitability. Both of them are critical and worth serious attention.
On one hand, labor is the largest expense of any organization with one or more employees. That means you need to keep accurate track of how employees spend their time so you can keep costs under control. In addition to the total hours spent on an employee, you need to keep track of the time spent working tickets and on administrative tasks.
On the other hand, you need to keep accurate track of the labor you are able to bill to your clients. In addition, you should keep track of the mix of billable and non-billable labor spent working tickets. You need to make sure you bill for everything you should. And even for the things that are covered by a managed service agreement, you need to keep track of the total hours in order to determine whether you're being profitable.
Here are a few guidelines that might be helpful. As always, you need to adjust for the processes and procedures in place in your company.
- Tracking Employee Time -
We use a PSA (professional services administration) system - and recommend that you do too. If you're still not familiar with PSA systems, it is well worth your time to look into them.
We started out like most companies, tracking our own time and building a system to automate as much as possible. Then we invested in ConnectWise and used them for several years. Eventually, we decided that a move to Autotask made more sense for our business.
With either PSA system (or Tiger Paw, or any other), tracking employee time is a key component. We have a few simple rules about employee time:
1) Employees must track all time from 8:00 am to 5:00 pm every week day
2) We created a way to track lunch breaks so that they are not part of the employee's payroll time sheet
3) Employee time is billable to us when the the employee is working on client tickets, "administrative" time, or travel time. Trips to the bank or to pick up the kids from school are not covered by payroll. :-)
4) All work is done on a service ticket. No ticket, no work. No exceptions.
5) Everyone must work in real time
Our most important rule about time tracking - and the hardest one to get some employees to follow - is that We work in real time. That means that you enter time into Autotask as you complete each task. Even if it's a single 15 minute time entry.
When you complete any service ticket, you enter notes into the system and put in your time. Right then and there. You do not save them up and enter all time at once. To make accurate time entries, you need to work in real time unless you have perfect recall or perfect notes. (Hint: you don't have these.)
I can't believe how many excuses there are for NOT putting in time as soon as the ticket is entered. They all sound a bit like this:
"I'm too busy. I don't have time. There are other, more pressing matters. I have a crisis."
All of which can be translated as:
"I'm not in the habit. I don't remember. I don't think it's important. I'm lazy. Getting the work done is important. Getting the paperwork done is not."
The mentality of technicians is such that we just want to fix things, not document what we did. But that documentation is important for a hundred reasons we won't go into here. One reason rules above all else: Money. When we document our work and close the ticket, we can prove that we did the job. We know what we did, when we did it, and the status of the job.
When you have even two employees, one will be managing the job board. That person needs to know the status of the jobs at a glance. That's where the PSA comes into the picture. The manager needs to be able to look at the job board at a glance and know what's going on. If the tech works a bunch of tickets and then wants to put the time in at night, the manager actually has no idea what's going on at any time.
Furthermore, if you have more than one tech, and a client who is nervous about a task, the job board is the only place for all the techs, and the manager to put notes and keep each other informed. What happens if Tech A finishes a job but keeps the notes for later tonight when he's got a beer in front of him? Tech B picks up a service ticket and begins working it. You lose money. Period.
The service manager/coordinator should be able to look at the text messages on his cell phone and see that his people are making progress. He should see a steady series of updates from the PSA as jobs enter the board and move on to completion. If his phone is silent all day and he gets 20 text messages at 8:30 PM, then his techs are not working in real time.
Building The Habit can be difficult, especially if you're a one-man shop. But it's still important. You need to know how long it really takes to do certain jobs. We all have estimates, but we can fool ourselves if we don't actually track the time. Even if you give the hours away, you need to do that consciously.
- Tracking Client Time -
The time we pay employees is closely related to the time we bill clients, but this is not a perfect correlation. Because we run a managed service business, we spend a good deal of time doing work that's "covered" under an MSA (managed service agreement).
In the beginning, we created our MSAs based on our estimates of how much time we actually spend maintaining servers, workstations, and network equipment. But what if we're wrong? What if one client takes twice as much time as we estimated? Are we still profitable?
Client time is divided into three primary types:
- Managed Service Labor (covered)
- Billable Labor
- Non-Billable Labor
Billable labor is then divided into regular hourly work and after hours work. The after hours rate is twice as much as the regular rate.
Managed Service Labor is time spent performing maintenance or (covered) repair work. Basically, if something is working and stops working, the labor to make it work again is covered.
Billable Labor refers to project or add/move/change work. This includes installing software, switching out desktops, creating new users, etc.
Non-Billable Labor is not the same as MSA labor. Non-Billable Labor is simply "billable" labor that the service manager has decided to give the client for free. For example, let's say that you estimated three hours to configure a content filtering system and it took the technician four hours. You could bill the client full price for three hours and then bill zero for the fourth hour.
That last little bit is important: You want all four hours to show up on the client's bill so they SEE that they got an hour for free. But you're sticking to your estimate of three billable hours.
This subject is covered under Time Tracking for Employees because you need to make sure that all time is properly allotted. See the posts on Service Ticket Updates and Massaging the Service Board.
Put it All Together - In one visit, a technician can sit down at a desktop and run a PC Tune-Up (covered work), then install a new piece of software (billable work). This should require TWO different service tickets. The first one is covered by the MSA and includes maintenance labor. When that job is done, the technician can go into the ticket, enter notes, enter time, and change the status to Completed or Closed (depending on your processes).
The second task is a separate ticket, which is attached to a billable labor (non-managed service) contract. When the job is done, the technician goes into the ticket, enters notes, enters time, and then changes the status to Completed or Closed.
This process only takes a few SECONDS to complete, unless the notes are extensive. Later, when trying to remember which job too how much time, and how the two hours should be allocated, the technician will be working with imperfect notes and imperfect recall. Will the job accurately reflect the billable time? You hope so, but you have no way of actually knowing.
- Implementation Notes -
As I've mentioned before, GIGO (garbage in, garbage out) applies to your PSA system. You won't be able to get accurate reports OUT of your system unless you put accurate information INTO the system. So when it's time to figure out how billable each technician is, or whether a client is profitable, you must assume that the data in your PSA system is accurate.
The data in your system will only be accurate when everyone works in real time and enters their time according to the process you've laid out.
First, you need to define your process in a simple paragraph or two.
Second, you need to train your employees. Use real world example with real clients to show them how it works.
Third, your entire team needs to support one another in this. Ask each other "Are you working in real time?" Follow the rules regarding billable and non-billable time. Massage the service board to make sure all tickets and time is properly allocated.
Fourth, force employees to follow the rules. Reject bad time cards. Make them stop what they're doing to get back into real time. Remember the long view and don't be short-sighted about what's important to your company.
Your Comments Welcome.
- - - - -
About this Series
SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.
Find out more about the series, and view the complete "table of contents" for SOP Friday at http://www.smallbizthoughts.com/events/SOPFriday.html.
- - - - -
Next week's topic: Phone Etiquette and Procedures
Introduction to Zero Downtime Migrations
Seminar on MP3 Download