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Profit & Growth Tips for Digital Agencies

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Why Excel Spreadsheets Are Damaging Your Digital Agency’s Profitability

Posted by Laura Hernalsteen on Dec 18, 2015

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For many agencies, spreadsheets are the go-to solution when they encounter a growing need to track time, bill clients and manage projects.

They provide a great starting point, but as your agency expands you’ll quickly outgrow spreadsheets and need to look for alternative tools. Today I’m looking at three ways digital agencies over rely on spreadsheets, and the problems these can cause your agency as it grows.

1) Time Tracking

This is vital for establishing how profitable your agency projects are.

When an agency realises the need to track employee time, they will create a custom spreadsheet template for each of their employees to complete. At the end of each day or week the employee will log how many hours they spent working on project X, Y or Z, and send a copy to their manager.

If you’ve only got a small agency team and you’re only working on a few projects this is fine. But as your agency grows and you have more projects on the go, the spreadsheet will become more and more complex to manage. Additionally, it’ll be very easy for staff to accidentally overwrite one of their timesheet files, losing data from previous days or weeks.

Time tracking will become an extra task to do, taking up valuable employee time and energy. In the worst case scenario, employees will forget to log their time and so either guess or completely make it up. This can cause inconsistencies in project naming, and billing inaccuracies, both of which can damage the relationship between your agency and the client.

2) Collating Time Tracking for Invoicing and Evaluation

Once you have received timesheets from your employees, you will then need to collate that information to work out how much time has been spent on different projects in the last day/week/month.

If your agency operates on the billable hour model, this will directly inform how much the client is charged for work on their project. If your agency uses a different pricing model, time tracking will still be essential as it allows you to assess the profitability of the project (by looking at the time taken in conjunction with the fees charged).

When your agency team is small, collating timesheets will be relatively quick and simple. But as your team and workload grows, this will become more complicated and time-consuming – especially if you are checking each of your employees’ timesheets in detail, to try and spot any time tracking mistakes or anomalies before the client is billed.

3) Simple Project Planning

When your agency team grows beyond its first couple of members of staff, you’ll want an easy way to allocate work on different projects to different people. For many agencies a spreadsheet will be the first tool they use, to create Gantt charts or project outlines.

Using spreadsheets will seem like the simple option because they appear easy to use, but as your agency expands and the projects you take on grow in scale and complexity, a spreadsheet will become almost impossible to manage. It will need to be updated manually, and with more and more team members to allocate tasks to, and sub-tasks of increasing complexity, it will take a huge amount of time to create and update the spreadsheet. Without ‘drag and drop’ editing, updates will involve inserting columns and rows and copying and pasting information. This can lead to inaccuracies in formulas as relationships between cells in the spreadsheet change.

Additionally, a spreadsheet isn’t designed to be used collaboratively. If your team is working on a project, it will be impractical for more than one user to update the planning spreadsheet as there’s no versioning functionality – it could lead to the file being duplicated, people seeing out-of-date information, and changes being lost. It’s also difficult to control access to spreadsheets, and information which should only be editable by managers can be changed by all employees.

What Can My Agency Use Instead?

If you’re using spreadsheets for any of these things right now, don’t worry. In the very early days of your agency, when you only need very simple functionality and you’ve only got a small team, a spreadsheet will work fine.

But it’s important that you’re aware of the difficulties they will cause as you grow:

  • Mistakes on your timesheets mean you bill clients incorrectly and your revenue will suffer
  • If your client questions your inaccurate time tracking, your relationship with them will suffer
  • If your project schedule spreadsheet is difficult to understand, or mistakes meant your data or calculations were incorrect, you’ll miss deadlines and that will affect your profits

Instead of using spreadsheets, the best option for your digital agency is a dedicated Resource Management tool. This will provide you with everything you need to schedule employee tasks, track time and analyse profitability.

A Resource Management tool is more powerful than a spreadsheet – the one tool can do all three tasks outlined above, in one place. It offers a simpler solution than a Project Management tool, and provides an overview of your agency activity in a visual, easy-to-understand format. It also provides analytics on your data (which you’d have to do manually in Excel), allowing you to make informed strategic decisions.

Don’t wait for spreadsheets to cause problems for your agency. You want to be proactive and find a solution before, rather than after, they come up.

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