Why is a time tracking relevant for consulting and advisory agencies?
Time tracking is gaining popularity in the modern office. More and more businesses are recognizing the potential this practice brings. The possibilities it offers include tracking progress and making plans for the future based on informed decisions.
Time Analytics was created to track business development by monitoring key performance indicators. These quantitative measurements show the current state of your firm, as well as historical trends. Analyzing KPIs helps identify problematic business practices in any consulting or advisory company. Resolving these problems will allow your team to become more productive and perform more efficiently.
Accurate profit and loss accounts, identifying your top-performing consultants and advisors as well as the team members who may need some additional help are some of the benefits of using a time tracking platform.
When it comes to your team itself, you can utilize the data you receive from the time tracking platform for a higher level of transparency. This will then allow for a more equal distribution of the workload according to team member experience and capabilities.
Time tracking possibilities
Tracking time per employee
Tracking time by the employee is one of the most significant advantages time tracking will bring to your company. Here are some of the benefits of this practice:
- You will obtain an insight into the way your employees utilize their time and if they actively work during all of their work hours
- You will discover how effective your team is
- You will be able to identify distractions and unproductive behaviors
- The top and low performers will be clear at a glance
- You will be able to see time utilization data
- Tracking overtime, vacations, and sick time will be simple and quick
Tracking time per task
Understanding task structure and how long each task takes to complete is crucial to any business. These factors determine the current state of your business and indicate possible improvements you can implement. Additionally, they can help you estimate the time future ventures will take.
Tracking time per task also means you will be able to identify any problems in your usual workflow and task delegation. Finally, you will be able to identify tasks that take up too much time compared to their relevance for your progress and productivity. This will help you determine the activities that could be outsourced so your advisers and consultants can have more time for crucial activities.
Tracking time per project or service line
Project line tracking gives you an accurate insight into your firm’s efficiency and productivity on the project level. You need to understand how much profit your primary services, i.e. company evaluation and reporting bring, and what is the profit margin coming from more specific tasks, such as creating new business strategies. It is also important to understand how much time each type of project will take up.
Tracking time per client
We have talked about the importance of tracking your own company. Yet, no advisory or consulting firm is an island. Their success depends both on their own work and the clients they take on. This combination is what makes the advisory business either profitable or unprofitable. Time tracking per the client can bring you the following benefits:
- Identifying the most and least favorable clients
- Tracking the profit each client makes
- Making profit assessments
- Identifying the contracts that should be renegotiated either in terms or cooperation model
- Understanding which contracts are so unfavorable for you that you need to terminate them
- Making more agreeable offers for your future clients
How to track time – basics and tips
Gauge the complexity of the process to fit your needs
Time tracking can be very simple or very complex, depending on the system you choose. Companies that strive to measure their productivity and improve it should take some time to figure out how complex of a system they need.
Some time tracking solutions are basically a substitute for a punch card machine. They only detect presence or absence and track the time automatically. Other platforms, on the other hand, are extremely complex and can take quite a while to use daily. They offer a large quantity of data, so they can take quite some time to set up initially and customize for each team or even individual.
In other words, you should choose a system that will both allow you to collect enough data to make informed business decisions and be simple enough to use daily and not take a lot of time. Simple inclusion into the workflow is crucial for successful time tracking right from the start.
Where to draw the line
As we have already said, there are many different options when it comes to time tracking solutions. These platforms also offer different levels and methods for tracking. Consulting and advisory firms need more data than a simple clock in/clock-out system can bring them.
Some tracking solutions offer the possibility to track multiple tasks using multiple automatic timers for the highest accuracy. The downside of this practice is that your team will have to toggle between multiple timers every day, which can be confusing and take up a lot of time.
Finally, there are some more rigid platforms that record keystrokes and mouse activity, as well as the apps and websites employees use during work hours. Some even offer the option to take screenshots of user computers at set intervals or randomly. While these practices will make sure none of your employees are slacking, they will also send a message of distrust and a high level of micromanagement. Additionally, using platforms that take screenshots during work hours can oppose the GDPR.
Time tracking and recurring tasks
Creating every task individually while using a time tracking platform can be a cumbersome task. In the same vein, going through numerous logs and looking for a specific piece of information is difficult for the management as well.
A good time tracking solution offers the option of creating recurring tasks that enable the staff to log their time in only a couple of clicks. Also, the management should be able to filter through the logs quickly and navigate entries easily.
Understanding billable rates
Having an understanding of billable rates is important for any consulting and advisory business that has a goal to remain profitable. When we are talking about billable rates, there are two values to keep your eye on – the planned (expected) rate and the realistic (achieved) rate.
The realistic rates can only be calculated after a project is done and invoiced for. The managers achieve this by dividing the total profit by the total billable hours spent on the project by an employee. The realistic billable rate should be as close to the planned rate as possible.
Time tracking solutions can help you manage the billable rates by implementing a billable hours chart. The system should automatically account for the individual consultant’s or adviser’s default billable rate as they perform the service. There is also the alternative of the users having the option to set up or adjust their billable rates.
Understanding cost rates
Cost rates are comprised of the hourly rate based on general expenses and the employee hourly rate, which is based on direct expenses and salary. Accounting for the defined cost rate and calculating cost rates per client or project are some of time tracking software’s most important features.
Reviewing timesheets
Time tracking tools for consultants and advisers should contain a comprehensible timesheet. Some countries made this document a mandatory appendix to salary accounts.
Timesheets are the crucial element in confirming work hours, tracking breaks, leaves, overtime, and other important indicators. You can use an online timesheet template, but make sure each full-time equivalent timesheet contains the following:
- All performed activities by the client
- Details of said activities
- Total hours
- The structure of billable and non-billable hours
- Billing rate by the hour
Understand your business with time tracking
The full potential of time tracking platforms can only be unlocked if you use the data you receive to propel your business forward. This means that receiving high-quality detailed reports is one of the biggest priorities when choosing a time tracking solution.
Time Analytics can help you make better decisions by displaying data about your total as well as billable and non-billable hours, expenses, etc., as well as advisors/consultants, clients, tasks, and projects. You will be able to access real-time and accumulative data.
Time tracking and billing
Time tracking software can simplify your billing process by giving you all the data you need for an accurate itemized invoice. This way you’ll be able to explain any additional fees by referencing the timesheets that contain data about tasks per client and hour.
Cost tracking
Time tracking and cost management are inseparable, as calculating profitability and efficiency indicators for individual projects and clients can’t be conducted without tracking costs by the work hour
How to track costs per project or client
Time and expense tracking platforms automatically draw work hour prices and include direct and indirect costs. Then they allocate specific costs to the projects they come from. The system can set up the cost rates for every employee, or the advisors can enter them manually.
You can calculate the total cost rate by adding the pay rate to the overhead cost rate. These two values are calculated in the following way:
The pay rate equals the gross salary divided by the average monthly working hours. For example, if the gross salary is $1500 and the number of hours is 150, the pay rate is $10. Knowing the pay rate is only the first step.
If you want to make accurate estimates for your expenses, you should also calculate the overhead cost rate per work hour. This is done by dividing the total overhead costs – office lease and utilities, supplies, phone bills, internet service, etc. by the number of employees and the number of working hours. If the overhead costs for the company in our previous example add up to $7500 and the company has 10 employees, the overhead hourly rate will be $5
Now we can add the pay rate to the overhead rate and come up with the total cost rate of $15 per hour. You can now enter this rate into the program and it will allocate the expenses automatically based on the tracked time spent on different projects and clients.
Now you will be able to see how much each client, project, and activity cost you without cost calculation and allocation.
The most important KPIs for consulting and advisory firms
Company average billable rate
Company average billable rate represents the average amount you get for the service you provide to your clients. You should compare this KPI to the expected billable rate if you want to make sure you are progressing at the rate you’re aiming for.
Employee billable rate
This metric is the key to identifying your top performers. It represents the rate your clients pay for a specific employee per hour. You can compare the employee billable rate to the expected billable rate and total cost rate to get a more refined employee assessment.
Client and project costs
You get to this KPI once you add all expenses allocated to a specific client or project. Time tracking is necessary to determine client and project costs, as you need data on time spent per project and client to calculate your expenses. Finally, you need the data on expenses to differentiate the profit coming from different clients.
Additionally, having a good grasp of this metric will allow you to budget more accurately in your next budgeting cycle.
Time utilization
Time utilization represents the ratio of billable and non-billable hours. It shows the time your consultants and advisors spend making a profit and the time dedicated to activities you can’t bill for.
Billable rate per project or service line
Knowing whether a specific project or service line is making you profit is the basis of any business. You need it for determining whether you need to adjust your rates in the future or not.
You can calculate the project or service billable rate by dividing total project revenue by the total hours spent working on that project.
Client billable rate
This KPI is calculated by dividing the total income coming from a client by the number of work hours invested in that client. It gives you all the information you need about the average amount of money you get from a specific client.
Billing rate utilization
This metric indicates the difference between the profit you’ve been expecting and the profit you’ve realized. You can calculate it as the ratio of the realistic billable rate and the negotiated or expected rates.
Task structure
Knowing how much time it takes to complete a task and the place of each task within your workflow can help you identify lapses in work organization and increase efficiency.
Insights into overtime
Overtime has become a common practice in many offices. Overtime in and of itself doesn’t have to be a negative indicator, but you should still see what causes it. Sometimes, overtime is the result of increased job demands i.e. more clients or more demanding projects than usual. On the other hand, overtime can be caused by unproductive behaviors as well.
In the first case, you will have to see whether the teams or individuals under the biggest amount of stress need additional help. In contrast, if the overtime is a result of unproductivity, you will have to find a way to surpass it. This often means having conversations with your managers or the employees themselves to find a solution.
Conclusion
Any advisory or consulting firm that aims to increase its profits should have an understanding of the benefits of time tracking. They also need to start using the software with positive time tracking practices in mind.
Even though your first instinct may be to start implementing drastic changes to your team, this probably isn’t the best course of action. Time tracking isn’t meant to enable you to micromanage or punish your employees. You can use its full possibilities only once you utilize the metrics and reports the system provides over time.
Time Analytics is a trust-based time tracking solution for consulting firms and advisory agencies that will allow you to get a realistic insight into the inner workings of your consulting or advisory company. It can help you identify the underlying problems you are facing as an organization and find the optimal solutions for them. additionally, it can bring your team closer together by increasing overall transparency and helping in task distribution. This way no one will feel either overworked or unappreciated.
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