Why Agencies Should Track Time

We’ll be honest. We thought all agencies tracked time. But it turns out some don’t. Some agencies rely on their gut — rather than data — to manage operations, budgets, and employee performance. Can it work? Running an agency without tracking time? Sure, it’s technically possible, but it’s definitely not ideal. Especially for those agencies looking to exit, looking to grow, or looking to increase profitability.

Common Excuses for Not Tracking Time

It’s Not Part of Our Culture

Certain organizations feel that time tracking is not part of their culture. That’s understandable. No one enjoys filling out timesheets. But the data they surface — and the revenue they help to create — enables top-performing agencies to continue to win new business and keep current clients. Besides, the (often boring) world of timesheets has changed. Online timesheets are easy to complete, mobile friendly, and integrated with Google and many other apps that your team loves to use.

We Have a Small Team

Without a doubt, time tracking becomes more powerful at scale. But even small firms benefit from a better understanding of client-by-client profitability, improved benchmarking, and in-depth reports on individual employee profitability. Even with as few as three or four employees, it can be challenging to know who is working on what, and how many hours or dollars remain for a given project.

We Don’t Care

This one always comes as a surprise. “We don’t care about tracking time” is tantamount to saying “we don’t care about how much money we make.” Running an agency is no easy task, and time tracking offers budgeting, forecasting, and staffing tools that consistently reduce costs and increase margins.

So What? Why Track Time?

Reduce Over Servicing

The average agency billing rate in the U.S. is $183/hour. Even if you have only ten employees who over service just two hours a week (an unbilled call here, a quick copy edit there), you are giving away nearly $200,000 in billable hours every year! Every year! Yes, there are times when strategic over servicing is required to support a key account or to build a case for future negotiation, but to over service — and not realize it — is completely unacceptable.

Increase Employee Utilization

Working on internal initiatives. Interviewing candidates. Reconciling expenses. These are not typically hours you can bill to a client. That’s just the way things are. Granted, it begs the question: What percentage of your employees’ time is billable? 70? 80? Is it enough? Could it be more? Best-in-class agencies are obsessed with employee utilization. And time tracking — when paired with real-time budgeting data — surfaces key utilization patterns and trends that allow these firms to more effectively allocate employee time.

Optimize Staffing

Those marquee clients sure look good on your website, but are they actually making your firm money? How many additional hours does your organization spend servicing high-touch accounts? Or are there certain industries or types of work (i.e. SEO or digital strategy) where you continually run over budget? By tracking time, costs, and project budgets — tied to specific employees and teams — you’re able to analyze and even predict revenue, and make staffing decisions that support your projections. It should be easy to see which employees are the most profitable. And it should be simple to plan employee time across any number of clients, even if your agency is growing quickly, looking to downsize, or spread across hundreds of locations.

Create Accurate Estimates

What is the true cost of delivering the services you offer? Are you confident that your team is accurately estimating project costs? Employee time and billing data can provide this confidence. More importantly, accurate data allows agencies to optimize the estimation process and increase profitability. It provides an opportunity for management to look back and say, “golly, that $5,000 line item is consistently costing us $7,500 in labor — let’s adjust the way we price this offering.” (Note: Management may not say “golly.” If they do, it’s ok to chuckle. Quietly.)