Time Tracking for Service Businesses—Don’t Give Away Your Time!

If you have a service-based business, you most likely bill clients for your time. Even if you charge a fixed price, it is probably based on how much time it takes to do the job. So it's crucial to your success that you capture that information for effective billing!

Time is the one completely inflexible resource we all have. There are 24 hours in a day, and you can’t bargain with that fact or rationalize it away. So it’s important that you keep track of your time so you  capture all the billable hours. If you don’t bill by the hour, it’s still important to know where that time is going so you know what activities are most profitable, and if your prices need to be adjusted if an activity takes more time than you anticipated.

I charge for my time, and I wish I could say that I had the perfect system in place for capturing all my hours. Truth is, I don’t, but after giving away big chunks of time over the year, I have learned to be more disciplined in tracking my time, (especially the billable hours!). 

There are a lot of tools for time tracking out there, and I use a combination of those tools. One trusty tool is my daily planner. If I’m working at a client’s site, I’ll just make a note of the time I arrived and the time I left on my paper calendar. It’s portable and it’s easy.

I also have a free app (I useToggl) that is both on my smart phone and on my PC. It’s handy in that you can start and stop the clock, and even pause it when you get that phone call. Then it will spit out a report upon request. There is a paid version that I believe gives more complex reporting, but the free version works for me—when I use it. Truth is, I’m more of a paper-and-pencil kind of gal, and when I’m working at home, I tend to use a paper time log to track time by client and make notes about what I was doing that I can include on the bill (you can do this in Toggl, too).

There are also billing and accounting apps (FreshBooks, QuickBooks) that will capture your hours and automatically create a bill for them. I use QuickBooks a lot, and I do enter my time in the Timer in my own QuickBooks file to create invoices.  The QuickBooks timer can be used stand-alone, without my needing to be in my own company file, and then I could import the data using an IIF file, but for me it’s just as easy to enter it manually (although now that I’m writing this, I may try the import feature).

I recommend tracking your non-billable time as well. This can be revealing! You might want to set up a goal of having a certain percentage of your time be billable, and could even budget your time as you do your money (you do budget your money, don’t you?), with a certain percent being billable, another percent for business development, some for administrative tasks, etc. My personal goal is 80% billable.

As I noted, I use a wide variety of tools to capture my time while I’m working, but then I consolidate it all into the QuickBooks timer so I can run a consolidated report on all my time. There are lots of tools out there that will capture all of the activites I listed above in one place, create reports, generate bills, and even import into QuickBooks. I just personally don’t have the patience to set one of those tools up and then use it at all the places where I work.  I don’t always have internet access for some of the online tools, and I also find it awkward to use some of those tools while I’m at a client’s site. So you just have to explore the options and come up with the system that works for you. 

The important thing is to have a system that captures all your time, so you don’t miss billable hours, you get some history on how long it takes you to do the activities you charge for so you can set your prices effectively, and you know how much time you spend on non-billable activities.