Time Tracking and Profitability in Service-Based Businesses
From: "Help! My Business is Growing" Podcast
For most businesses, your people are your most significant expense and greatest resource, especially if you run a service-based business.
You will have to track how you AND your clients utilize this "resource" to ensure your business stays profitable.
Timesheets or time-tracking software are an effective way to do this; from a business perspective, it makes perfect sense.
Yet, even just whispering the words "timesheet" or "time tracking" can cause stress and even resentment among your team. It is universally looked at with suspicion and, if not correctly implemented, could negatively impact your company culture and alienate your staff.
So how do you introduce time sheets and motivate your team to use them? What are their benefits, and how can they help with your profitability?
In this episode, our guest George Wiedemann shares his experiences managing a service-based business and discusses the benefits of time tracking and how it is crucial to keep your business profitable despite initial employee resistance.
George was the founder and CEO of Grey Direct - a global subsidiary for Grey Advertising - for 21 consecutive years of worldwide growth. He was also the CEO of pioneer Silicon Valley email platform Responsys; and CEO of The DRUM Agency.
He is the founder and CEO of Relationshipping Consulting, focusing on bringing efficiencies to large-scale enterprises through deep budgetary analysis and process alignment. He also works with agencies on their strategies and plans.
In this week's episode, we discuss:
04:27 What are some of the best practices when using timesheets?
08:20 What did you log into these time sheets?
17:05 Does finance play a part in the process? From contract signing to client meetings?
20:17 What happens when you spend too much time on one client and go over the budgeted hours?
Listen to the podcast here:
What are some of the best practices when using time sheets?
Inform your employees about its benefits.
During the onboarding process, have your finance staff inform your new team members about client profitability and why your business has or will soon have a "timesheet culture". Let them know that you must have timesheets so:
you can price services correctly
the company can have profits
the company can provide employee bonuses
Have a timesheet diplomat in place.
You will always have employees who are conscientious about submitting their time sheets. Some will update it every few days or once a week. Then you have people who won't update them or will never submit them on time because they are too busy and under pressure. To prepare for people like that, have a diplomatic finance person give them gentle reminders at the start of every week.
What did you log into these time sheets?
Tell people about it as early as possible so that they get used to, at the very least, the concept of impending change, even if what changes will be made is not exactly in its final incarnation.
This way, when the actual change day arrives, they will feel ready, informed, confident, and curious, and though even if you may not know everything, your people will at least have the information and the time to process and understand what is happening, but also why it is taking place and how it is relevant to their work.
“There was a discipline (in the agency) that work could not begin without a strategy signed by the account director all the way down to finance." - George Wiedemann
Does finance play a part in the process? From contract signing to client meetings?
Absolutely. The finance head or director must be fully engaged throughout the entire process at the very least to figure out how to charge the fees: is it fixed? Will it be worked into the bill? What about the retainer fee and commissions and such?
And while this might be difficult to achieve, having a weekly department head/ C-Suite level personnel meeting, including the creative department head, the head of media, business development, and analytics will do wonders for the company, especially if your finance head is there as well.
They will immediately see if "the car was driving off the road" regarding your operations or relationship with specific clients. Finance will be in the mix and have an accurate picture/view of any issues that will come up and be able to make more informed decisions or strategic plans.
What happens when you spend too much time on one client and go over the budgeted hours?
It will depend on the client.
You have "good" clients who understand profitability obligations and know that your people worked excess hours on their accounts. They will ask you to send an invoice and pay it off.
Then you have "tough" clients who will not want to pay for extra hours. If they don't, you can negotiate that in the next quarter, where the work effort was supposed to be x amount; you can say that "we're going to reduce the work effort" so that it balances out.
Suppose they still need to agree to this. In that case, it might lead to a more extensive conversation about streamlining systems and processes, especially if they had "too many cooks," and to show the client why the workflow took so long and there was so much more extra effort to make it happen.
We go in-depth with this topic and more over at the podcast. Listen here:
1. Take some time to inform your team about the benefits of time tracking, especially in terms of profitability and increased productivity which will benefit everyone in the long run.
2. Time sheets should include all work done for a particular client, including overtime and work done over the weekend.
3. The finance department is integral when dealing with clients, from coming up with payment structures and being involved in weekly c-suite meetings to address any financial issues early and even client meetings to help negotiate charges and such.
4. When going over or under budgeted hours, always be prepared to defend your work and negotiate with your client. Some might be fine with it, while others may question and resist paying the extra fees.
About George Wiedemann
Founder and CEO
George has spent his entire career in the marketing field on both the client and advertising agency side of the desk. He began his career at Time Inc. becoming the youngest Circulation Director in the company's history at age 27.
At Grey Advertising for 20 years he built the global subsidiary Grey Direct from scratch reaching 38 companies and over $1 billion of client spending.
Intrigued by the internet and technology he spent three years in Silicon Valley running Responsys, one of the first large commercial email platforms, which Oracle acquired in 2016.
George spent 14 years building DRUM Agency which unfortunately ended due to COVID.
In that entire span, George has been a passionate practitioner of the art and science of connecting consumers with brands.
He now consults, having established Relationshipping Consulting helping clients, both enterprises and agencies, build thriving companies.
Website - https://www.relationshipping.org/
LinkedIn - https://www.linkedin.com/in/george-wiedemann
by Kathy Svetina
Kathy is a Fractional CFO and the founder and director of NewCastle Finance LLC. She is a financial puzzle solver, focusing on women-owned businesses, and providing financial insights needed for a healthy and sustainable business.