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Profit & Growth Tips for Digital Agencies

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How Detailed Does Your Agency Time Tracking Need to Be?

Posted by Nicolas Jacobeus on Jul 18, 2016

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Time tracking is essential for maximising your agency’s profitability. But some companies track their time down to the minute, where others don’t break it down any further than their two-week project sprint.

If you’re just starting to track your agency time, how granular you go will depend on why you’re tracking time. Is it to work out your billing, or is it an internal-only process to ensure you’re charging appropriately for your work?

Billing-related Time Tracking

The level of detail that your agency goes in to when tracking employee time will vary depending on the average size of your projects. If your projects normally only last a couple of weeks, your employees’ time will be measured in much smaller increments than if your projects last for months or years.

As a simple guideline, your agency staff should track their time in the same units that you bill to. For example, if your agency bills by the hour, your employees should track their time by the hour too. This is because it will make it simple to generate customer invoices, as you can easily calculate the number of hours spent on a specific task or project, and generate the invoices using the data from your employees’ timesheets.

Additionally, if you send over your employees’ timesheets alongside the invoice, the customer can see exactly how much time was spent working on their project, making it less likely they’ll want to challenge your invoice.

Time Tracking for Internal Use

If your agency doesn’t work on a billable hour model, then time tracking will be for internal use only, rather than being used to generate invoices. The level of detail you go in to will depend on what you want to use the time tracking data for.

If you simply want to use it to assess the profitability of a project, then you will need less detail than if you’re trying to assess and compare the performance of individual employees, or work out how to improve your agency processes.

To assess the profitability of a project your employees will only need to track their time spent on each project, so time tracking can be done at a high level. If your team are good at time-blocking (dedicating several hours at a time on a single task or project) then you shouldn’t need to break down time tracking beyond half-day increments.

If you want more detailed insights, you’ll need more granular time tracking. For example, how long do your developers spend fixing bugs each week, or how long does your content team spend putting together blog posts? This information will help you compare how teams work across different projects, and how efficiently individual team members work.

Productivity vs Insight

But it’s important not to get too granular with your time tracking. While it might be great to get lots of insight into how your team is performing, being too detailed can eat into your team’s productive work time. A good rule of thumb to work by is if your employees’ timesheets include time spent time tracking, then you’ve gone too granular.

In summary, you should only track time to the level that will provide you with the insights you need. Keep it too high-level and you’ll miss out on information that’s key to your agency’s performance and profitability; go too granular and your employees will feel micro-managed, and lose out on valuable work hours.

how to make your digital agency profitable

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