Why Having A Time-Entry Policy Is So Important To Understanding Your Agreement Gross Profitability

  • Kyle Christensen
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    Kyle Christensen

    Kyle Christensen is the COO at Sierra Pacific Group. With over 15 years’ experience in the IT and MSP industry, he has a proven track record of bettering company efficiency and increasing success through fortified operational processes, system automation, business management, data analysis, and refined solution offerings. Kyle has consulted with many technology businesses via Private Consulting, EOS implementation, peer groups, and public events to help drive performance of many MSPs and IT Departments.
  • October 1, 2022
  • 6 minute read

As an IT business owner, you likely understand the importance of sales and cost management but, what about time-entry policies and expectations? Many business owners don't put enough emphasis on this aspect of their business, which can lead to some serious problems down the road.  

Whether you are performing work on-site, remote, as a professional courtesy, or investing in meeting their expectations (vCIO, Account Management, Client Success, etc.), tracking time is essential in being able to objectively manage and monitor your business functions.  

In this post, we'll discuss why having a time-entry policy is so important to understanding your Managed Services Profitability (as well as your Agreement Gross Profitability). We'll also look at some practical tips for creating one that works well for your business model and clients. Without further ado, let's dive in! 

What is a time-entry policy?

Your time-entry policy is a set of rules and guidelines used to determine how much time employees spend working on each task. Time-entry policies can vary widely from one company to another, but they have some common elements.  

For example, many companies have specific rules about what time employees should start their day so they don't miss any deadlines. Some businesses require all workers to clock out before leaving work. In contrast, others don’t require people who work remotely to clock into an office computer system first. Either way, these types of rules help ensure everyone gets paid accurately based on actual hours worked regardless of whether someone works remotely or not. 

Time-Entry policies are one of the largest differentiators between a mature and immature IT Service provider. It is one of those topics that owners are so polarizing in as it requires the most time to manage. But what is critical is that time entry be viewed at in a couple different ways. 

 

HR and Payroll 

This perspective is the easiest to grasp as it is how you pay your staff. In many states, IT Professionals are compensated through hourly wages. Your time-entry policy ensures that you are paying your team what they are entitled to. 

 

Profitability and Staff Utilization 

This is the main reason, as an owner, that time-keeping is important. With sufficient time-keeping practices you are able to better understand where your IT Services costs are going. While you may be able to understand the ‘Macro’ view of your finances (P&L), you’d be hard pressed to objectively understand the clients, projects, or tasks that your labor costs are being allocated to. Simply put, without time-keeping practices you are unable to understand why your total Managed Serice Profitability is high or low; therefore unable to create decisions to mature and improve.  

When it comes to understanding your agreement's gross profitability, time-entry is one of the most important factors. By having a time-entry policy in place, you can ensure that all employees accurately record their hours worked. This way, you will have a clear picture of how much work has been done, by who, and what that cost to perform. Without this information, it can be difficult to gauge your business's overall performance and make accurate projections for the future.

Advantages of a Time Entry Policy In Your Profit Margins

 

  1.  Helps Ensure Accurate Time Tracking and Billing

One of the main advantages of having a time entry policy is that it helps ensure accurate time tracking and billing. When employees are required to track their hours worked, they are less likely to bill for more hours than they worked. This can help you better understand multiple levels of how your business is operating. What is most important, though, is it will allow you to better allocate your labor to the clients that need it most and recognize when more labor is needed (hiring based off capacity utilization, not off of feel).

 

  1. Helps Employees Stay On Task

A time entry policy can also help keep employees on task. When professionals know that they need to track their hours and report them to their supervisor, they are less likely to have downtime or work relentlessly on unimportant tasks. This can help improve productivity and reduce the amount of wasted time, which translates to fewer expenses and better profitability. 

There are a variety of time entry tools, with associated training resources, that you can leverage to improve your results as well. For example ConnectWise has a variety of tools that allow for easy time tracking, from an internal stopwatch function that make time tracking simple, to a ticket-by-ticket time tracking system that allows for many different types of work to be logged.  

 

  1. Helps To Forecast Your Expenses and Budget Accordingly

Another advantage of having a time entry policy is that it can help you forecast your expenses and budget accordingly. By understanding how much work has been completed and how many hours have been billed for, you can get a better idea of how much money you will need to spend in the future to complete certain tasks. This information can be helpful when planning future projects or setting budgets. 

In addition, a time entry policy helps keep track of your current spending habits so you can see whether or not they match up with your budgeted amounts. If there are significant discrepancies between actual bills paid and projected in the budget, it may be time to reevaluate your spending habits and make some adjustments accordingly. 

 

  1. Avoids Disputes On Billable Hours

Another benefit of having a time entry policy is that it can help prevent disputes between employees and employers. When everyone is aware of the expectations and rules regarding time tracking, there is less chance for conflict. By clarifying these expectations upfront, both parties can avoid any misunderstandings or disagreements about what is considered billable work. In other words, if you set the expectation with an employee that they are accountable for X% of their work to be client facing, than they understand the objective need of their role.

 

  1. Manages Resources Effectively

With accurate reporting methods in place, managers can better control how many hours their team works so they are not wasting resources or money on unnecessary expenses. This, in turn, can help with better scheduling and resource allocation so that your team is working as efficiently as possible. 

 

  1. Time Tracking Improves Overall Work Processes In the Organization 

Time tracking has many benefits for both employers and employees. It can help improve overall work processes in the organization by streamlining operations with better reporting methods. This will allow managers to see exactly how their team is performing each day or week. This information will then allow them to deduce valuable insights to make adjustments accordingly if needed so that everyone is working at an optimal level throughout the year. 

 

Setting Up a Time Tracking Policy 

For service-based businesses such as  Managed Services Providers, the first step in setting up a good time entry policy is understanding what types of services you offer and how much time each one takes. This will help you create accurate invoices and make sure that clients understand the scope of work they're paying for.  

On the contrary, the timekeeping method is also efficient for monitoring workplace productivity. Setting up a time tracking system that is easy to use and makes it simple for employees to report their hours worked can be extremely helpful in understanding where time is wasted. It can also help you figure out ways to optimize the work process. 

It's important to keep in mind that a time entry policy is not just for tracking hours worked, but also for understanding where those hours are being spent. Establishing clear guidelines and expectations upfront will help reduce overhead expenses while ensuring everyone is working at optimal levels. 

 

What Should Your Policy Include? 

 

When creating your time entry policy, it is important to cover all necessary information pertaining directly to the work being done. The following guidelines will help you get started: 

  • What duties and responsibilities does this person have? 
  • Work hours (include start/end times) 
  • How many hours per week should this person work? (full time vs part-time) 
  • How many hours of the week should be billable, or client facing? 
  • How often should this person clock in/clock out during each shift (if applicable)? 
  • Reporting procedures: who is responsible for submitting timesheets, and when are they due?
Your policy can also include information about other aspects of their job, such as any specific rules regarding non-billable work or time wraps. This will help ensure that accidentally overpaying for services is avoided, and it will not create an unexpected expense down the road. It's important to note here, too, that if an employee is working remotely, you will need to have a specific policy in place for time tracking. 

Time Wraps are is a setting in ConnectWise Manage that requires all timesheets to have 40 hours regardless of what you are doing. 

 

The bottom line 

Having a time entry policy is important for many reasons. Still, some of the most notable benefits are that it can help improve overall work processes, prevent disputes between employees and employers, individual contractors and clients, and manage resources more effectively. You, as a business owner, will have a clear picture of how much work has been done and how much money has been earned without relying on guesswork or estimates.  

By setting up these expectations upfront, both parties can avoid misunderstandings or disagreements about what is considered billable work. Additionally, it creates accurate invoicing, which will ultimately save time on billing and invoicing tasks while reducing potential mistakes in reporting methods. Everyone knows exactly how much they should be paid for each hour worked.  

Having a time entry policy is essential for any business owner who wants to understand their agreement's gross profitability. By ensuring accurate time tracking and billing, employees are less likely to waste time, and businesses can better forecast their expenses. Implementing a time entry policy is one of the best ways to improve your bottom line.  

If you’re looking for a resource to help train your staff in proper time entry, answer questions and set up the tools that will improve the process, then Sierra Pacific Group can be your guide. Contact us today!

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