29 Time Tracking Best Practices

01 • Time tracking

Tracking time using the timer vs filling the timesheet

There are two ways you can keep track of time:

• Measure working time using a timer - start tracking time when you start working on something and stop when you finish (or when you switch to a different activity).
• Add time manually later - approximate and enter all your time entries at the end of the day/week.

Which method is the best? It depends on why you're tracking time.

If you're tracking to measure and improve productivity, or some other reason where you need highly precise results (down to the minute), use the timer.

If you're tracking time because of compliance (like DCAA), need an estimate for how long a project takes, or how long you've worked for payroll purposes, you can keep track of time by manually filling the timesheet.

Most organizations don't need a high degree of precision. Management just needs to know how many hours some activity took and whether everyone filled their 8 hours a day quota.

But when you're tracking time because you want to improve productivity, you need to account for each minute (and factor in the time you spend on breaks, social media, email, etc).

Like any other documentation, time tracking creates overhead, so you have to weigh how much data you need against the value it provides. Ultimately, your reporting needs should determine what you will track and how detailed it should be.

02 • Time tracking

Automatic vs manual time trackers

There are two types of time trackers: manual and automatic. With manual ones, you have to enter the time you've worked or start/stop the timer yourself manually. With automatic, you just install the app and it runs in the background, keeping track of what sites you visit or what apps you use. Both types have their uses.

Automatic time trackers are useful for getting insight into how you spend your day without having to lift a finger. This makes them great when you want to track your productivity and cut the time you spend on social media or similar non-productive stuff.

But, automatic trackers can't tell how much time you've spent on some project or how much you should bill clients. Also, they might show you've spent 24 minutes in a spreadsheet, but can't tell why, or if you were even working.

Manual time trackers, although they do introduce more overhead, are better suited for work hours tracking. They let you categorize time-based on your specific needs, give you more control, and are more reliable. They let you categorize time around meaningful projects, calculate your billable hours and earnings, and see what your team worked on (and not just what sites they visited, or what app they've used).

03 • Time tracking

Don't track every little thing

Tracking time is an overhead task that no one enjoys. The more details and precision you require, the greater the chance you'll get incomplete and inaccurate data (especially if the staff doesn't understand why they have to do it).

A general rule of thumb: if it takes more than 15 minutes, it deserves its own time entry.

For example: if you're taking a bathroom break, you don't have to track it - just add it to the project time. If you're taking a 30m lunch break though, either don't track it or tag it as break.

This also applies to freelancing. For example, you don't have to track communication, unless client chats take so long that they need to schedule them, or if you're dedicating whole time blocks just to replying to emails.

Another example is research, which can take a lot of time. If a client hired you to do something that's outside of your expertise, you can charge for half. After all, whatever new things you learn, benefit you, and everything you learn that's project specific, benefits the client. So, it's only fair to split the costs.

04 • Time tracking

Track even non-billable activities

It's a good practice to track time you spend on thinking, researching, communication, and other non-billable activities.

You may not include them in invoices, but they're extremely important when calculating your real hourly rate.

For example, you might charge a client for 100h (the time you've actually spent on activities), but when you take into account all the extra time (emails, feedback, administration), you've effectively spent 120h, thus bringing your real hourly rate down.

But, once you know the total time it takes, you can calculate whether a project is worth doing, how off your estimates are, and whether you should raise your hourly rate.

05 • Time tracking

Organize time around projects

Time tracking data isn't that useful if you don't have a way to make sense of it in reports. That's why it's important to create projects around which you'll group related entries.

You can create projects for everything that's meaningful, to categorize in buckets: departments, clients, activities, jobs, matters, work orders, processes, etc.

You can categorize projects around clients too, if you want to better organize projects themselves. These clients don't necessarily have to be real clients/customers. They can be departments or anything that makes sense to divide projects by. Just keep in mind that clients can have multiple projects, but a project can belong to only one client.

You can also break projects down into tasks (i.e. sub-projects) and add one more level to your hierarchy. Tasks can indicate a type of activity (like coding, designing, legal), or be more specific (design homepage, fix database, write project proposal).

If you need more control over categorization, use tags (i.e. labels). They work independently of the project hierarchy and are a great way to add additional information to entries, so that they're easier to filter out. For example, you can use tags like "special currency", "invoiced", "activity", "reviewed" - in other words, things that can be applied to any time entry regardless of the project it belongs to.

06 • Time tracking

Tags are very useful for filtering reports and when invoicing

Tags work regardless of the project hierarchy you have, and you can use multiple tags on one entry. They are like keywords for filtering reports.

Because they work across projects, you can use them for types of activities (Analysis, Design, Development, DevOps, QA, Meetings, Emails, Break, Training, Research) and see how long you've spent on each activity that week.

You can use them to help you when invoicing clients. You can group entries by project and subgroup by tag, so clients can differentiate the type of operation performed.

Another use case is to tag entries that require special billing rate so accounting knows that when creating an invoice. Or, you can tag invoiced entries so you don't bill clients twice by accident.

07 • Time tracking

Don't wait to categorize time later

The best time to categorize time is when you record it. If you do it right then, you'll save yourself from much of the hassle down the road (not to mention wondering what project a particular entry is for).

To enforce this habit, you can use required fields. Simply define the minimum level of information a time entry has to contain before it can be submitted. For example, you can make a rule that each entry needs to have project attached, and you and your team won't be able to add time without one.

This is great for keeping reports clean. If you don't enforce this, you may end up with inaccurate reports, not because the time wasn't submitted, but because it hasn't been properly labeled and isn't displayed where it should be.

08 • Time tracking

Not every time entry needs to have a description or a note

Requiring that each entry has at least a project is the best practice, but requiring description is often too much, and should only be used when you need notes for every item in order to justify time spent to others (like your client or the government).

Requiring description is an overhead cost that often isn't worth it. Every piece of data that you ask a person to fill in increases the amount of time and work they have to do (and not to mention the strain on willpower).

09 • Time tracking

Take advantage of extra features when using a timer

The biggest nuisance with using a timer is starting and stopping it. When you go on a break or are away from the computer, you have to remember to stop the timer. If you constantly go away from a computer but forget to stop the timer, you can enable idle detection. When the app notices that you're inactive, it will ask if you want to discard the idle time.

If you sometimes forget to start the timer while working, set up reminders, so the app can send you a notification if it notices the timer isn't running during your work hours.

Another great feature is automatic start/stop timer. When you have the time tracking extension installed, the timer can be automatically start when you open your browser and stopped when you turn off your computer. This is great for automatic clock-in when you come to work and automatic clock-out when you're finished working.

If your team members forget to log their time at the end of the week, you can set up targets and reminders. This way, if they don't log a certain number of hours each day or week, time tracking software will automatically send them a reminder to enter their hours the next day or at the start of the next week.

Another great productivity feature is Pomodoro timer. Pomodoro is a productivity technique where you work in short but highly focused 25-minutes bursts, with 5-minute breaks in between. Once you enable the Pomodoro timer, the app will send you a notification when the 25 minutes have passed, and it's time for a break.

10 • Time tracking

Approximate time when you forget to start the timer

When you use the timer, you'll often end up forgetting to start it or switch it off. This is very common. Instead of trying to be perfect, it's best to have a strategy when stuff like this happens.

When you forget to start/stop the timer, just approximate the time, enter it manually, and move on.

If there's already a timer running for some different activity, stop it, estimate and subtract how long you've worked on something else, and manually create a new time entry for the missing activity.

11 • Time reporting

Make a list of questions that time tracking data needs to answer

You track time because you need answers, and some will be more important than others. Prioritize them and then document the action plan on how you'll answer them based on the data you have.

Q: What are we actually working on?

A: Run the Summary report every Friday for the past 7 days, group by project, and subgroup by task.

Q: How much should we bill our customer?

A: Filter Detailed report by client for the previous month, exclude non-billable entries, export in Excel, and give the doc to your accountant.

Q: How much should we pay each employee?

A: For quick reference, run Summary report and group by user. For payroll, run the Detailed report, export to Excel, and give the doc to your HR/accounting.

Q: Which of our current projects are losers that we should stop working on? Which of our current projects are winners in which we should invest more? Which of our customers are profitable? Which of our projects are profitable?

A: Set project rate and compare earnings between projects based on time spent.

Q: How much are we investing in a project? How much time similar projects took us in the past? How many resources will I need to complete a project like this?

A: See project status for an archived project, and see tracked time breakdown by task.

Q: Do we underestimate or overestimate the time needed, and by how much? Where are the bottlenecks in our operations?

A: Set estimates for each task and project, and compare tracked vs budgeted time once a week.

12 • Time reporting

Audit time once a week to check if all time is labeled properly

If you don't enforce required fields, you'll have to run a time audit at least once a month, or preferably once a week (the longer you wait, the more difficult it will be).

Why run an audit? To make sure each time entry has been properly attributed to the project it belongs to. Just having the time recorded isn't enough. If it isn't properly categorized, reports won't be accurate when you analyze them.

In addition to searching for entries without a project, time audit also useful to filter out entries that are too long/short.

For example, sometimes people start a timer by accident, but forget to delete the entry. You can search for all the time entries that are shorter than 1 minute, and delete them to keep reports clean.

Or, you can search for entries that are longer than 8 hours, and ask team members about them. In most cases, they probably forgot to stop the timer. If you need a more precise breakdown of time (team member spent 8 hours on a project, but only made one entry), you can ask team members to break them down.

Keep in mind that, in the beginning, it's better to encourage people just to start tracking time and categorize projects later manually. As time tracking becomes a habit, you can start introducing more details and required fields, and rely less on time audits.

13 • Time reporting

Set hourly rates and assign a monetary value to each hour

When you're a freelancer, it's very motivating to see how much money you've earned after a hard day of work.

But assigning hourly rate isn't just for freelancers. If you have a team, you can assign their hourly rate to track project costs and budget, and see if the value of the time each employee tracked is greater than their fee/salary.

When you see a $ sign and numbers in reports, both you and your team will gain a new appreciation for time.

Also, separate billable and nonbillable time. For freelance time tracking, the time actually is billable or non-billable. For others, who don't really have billable time, you can use it as a productive/unproductive designator.

Then, in reports, you can compare value adding time with non-value adding time. If you notice that you have too many non-billable (non-value adding) activities several days in a row, you can reprioritize your activities.

14 • Time reporting

Estimate project duration and track project status based on them

Estimate how long you'll need for a project together with the team, just for fun. You don't have to use it as a guide or anything like that. Then, see how much time it actually takes.

You'll be surprised by the actual results. On average, people are bad at estimating time. Only when you have concrete data can you get better.

Next time you have a project, your estimates will be more realistic and you'll be better at planning where to spend your organization's resources.

15 • Time reporting

Round time up when running a report

When you're using a timer, reports can be a bit too precise and tiresome for the eye (eg. 2:34:21). In those cases, round time to nearest 15 minutes. Then, all your ragged entries will become nice and clean. If you need decimal time, round to nearest 6 or 12 minutes.

If you're charging clients by the hour, choose "Round up" instead. Then, all your quick 3 min fixes will show up as 15 minutes (or higher if you want).

Rounding is a common practice in the legal profession and is the reason why lawyers can end up earning more than they actually work. Because they bill by 1/10th hour, a 30-second phone call and a 2-minute email are both rounded to 6 minutes for total of 12 minutes. This way, they can easily bill 8 hours in 6 hours (while staying honest).

Time rounding is also useful for accountants, who often need nice and round numbers. Instead of hassling people to round their entries manually, they can get rounded values automatically.

16 • Team adoption

When introducing time tracking in a big organization, start with a pilot program

If you're looking for a time tracking solution for employees, it's best to conduct a pilot program in one department before rolling out the system to everyone.

The pilot program lets you test out timekeeping software without making a big commitment. It also lets you collect feedback and devise an efficient system on a small scale, which you can easily tweak and change.

You should send a clear message that the system will grow and that it's the teams duty to contribute The smaller the team is, the more engaged the users will be (due to the Hawthorne effect) and the more feedback you'll receive (as the people will know it's expected of them to provide feedback)..

Having just a few users at first is great, because you can improve the processes quickly. In contrast, when you have hundreds of users, each decision costs a lot of time to implement: you have to notify hundreds of people and they need to change their habits.

Another benefit is traction. Getting early adopters among influential people will help with the wider adoption.

Lastly, don't complicate the process, at least in the beginning. Start simple. Give people a very simple time entry screen at first, and then slowly add new levels of detail, like projects and tags.

17 • Team adoption

Keep the data entry as simple as possible

The fewer details you need to fill, the greater the chance timesheets in your timesheet app will be accurate. But how much detail do you need? It depends on how granular you need the reports to be.

For example, do you just need to know how long it took to fix some bug, in total? Or do you need to know how much time each activity took (finding the cause, coding, and testing)?

Depending on the answer, you'll simply file the entire entry under the respective project and tag it QA; or you'll create multiple entries, each with its own description and tag.

Just keep in mind that, the easier you make time tracking to people, the more accurate timesheets will be.

18 • Team adoption

Communicate WHY people need to track time

The best way to motivate people to track time is to actually need the data. For businesses that pay employees and charge clients by the hour, it's easy to understand why time tracking is important and you'll have no trouble getting people to track it.

But when you roll out time tracking in a business where that isn't common, you'll have to explain why time tracking data is important for your particular business, and for what purposes it's going to be used. And then, you'll actually have to demonstrate value and show how you use the data to encourage people to keep tracking it.

Once people understand why tracking is important, and as long as the data genuinely helps the business, people will have no problem with time tracking. In fact, they will try and actually help in ensuring you get the data you need.

This is in line with scientific research: when people were asked in an experiment to let someone skip ahead in line, people who provided reason had 94% success rate, compared to 60% who just made the request without explaining why.

19 • Team adoption

Don't force people to use the timer

If you're introducing time tracking, adoption will depend on how easy it is to track time and whether it interferes with daily work - and using a timer definitely interferes more than entering time in one go.

Timer lets you have more precise data, but manual timesheets let you have close-enough, but more accurate data. Even though it might seem that having more precise data is better than close-enough data, using a timer is inconvenient and will result in less reliable data.

For instance, if people have to use the timer, they will bill all of their time to projects. For example, they'll leave the timer running even while on the break, so projects will be overbilled. "Spent time helping someone with his or her project? Toss it under my current project." This means you won't have a good account of time spent on general activities.

This happens because of non-aligned interests. Employees need to fulfill 8h/day and if they're using the timer, having nice, round, 8 hours each day is impossible. In contrast, freelancers are motivated to use the timer because they are responsible only for themselves and it's in their best interest to have a precise breakdown.

20 • Team adoption

Don't insist on precision as accurate data is better than bad data

It's better to know you've spent close to 120h on a project than to think you've spent 90h (which actually happens all the time because our brains are terrible at estimating time).

But, it's better to be 90% precise and keep employees happy and productive, than to be 100% precise, but risk frustrating employees and wasting time on enforcing rules.

In fact, the more work time tracking requires, the fewer the chance that employees will be motivated to track it accurately, and the more likely you'll end up with way more inaccurate data than you'd have if requirements were more flexible.

When choosing between precision (70% chance that 3:43:23 tracked is real) vs accuracy (99% chance that 4h±30min tracked is real), accuracy is always better.

21 • Team adoption

Filling timesheet each day is much better than at the end of the week

Employees can log their time manually at the end of the day, before going home, by entering time in decimal (1.5) or clock format (1:30).

They can also fill timesheet at the end of the week, but that's actually counterproductive. You might think: if they have to do it less frequently, it won't be such a burden. But it's actually the reverse.

Entering a large amount of time at once, for a large time period and after a long lag, is frustrating. Employees will have to remember what they worked on way back on Monday, waste time remembering and going through their notes and calendar, end up forgetting most of the stuff, and entering dubois data.

Why? Imagine sitting down for 3 hours and entering everything you've worked for the previous month. It's excruciating. Compare that with entering time at the end of each day. It can be done in a couple of minutes and of the top of your head.

Filling the timesheet at the end of each day is the sweet spot between using a timer all the time, and filling the timesheet at the end of the week.

A useful strategy for entering time is to write down everything you want to work on at the beginning of the day, and at the end of the day, check the list and enter approximate times for each activity.

22 • Team adoption

Assign someone to check timesheets every single day

When you first introduce time tracking, the process will be spotty. People will regularly forget to fill their timesheets, or they'll wait too long and get frustrated.

So, put someone in charge of checking timesheets and reminding people to fill them before they leave work. It doesn't have to be a manager, anyone can do it.

You can even automate the process (in case everyone's too nice/shy). Time tracking software can send regular reminders to track time if a person hasn't logged a targeted number of hours, you just have to set the rules who gets them and when.

23 • Management & administration

Make time tracking data transparent

You can limit who can see time tracking entries to admins or everyone. For some data, it's ok to limit only to admins (in case of private projects).

But, you should strive to make the process transparent. Others will be able to see who worked on what, see that people are regularly filling their timesheets, and be motivated to do the same (ie. follow the crowd).

If the team is competitive, you can even enable the Team Dashboard so people can see who tracked the most time. A little bit of competition is a good thing, as long as there's no extrinsic reward.

24 • Management & administration

Don't use time data for criticism or performance review

Time data is there to help you assess how the organization is performing, whether projects are profitable, and how much you should charge clients and pay employees.

Time data shouldn't be used for assessing work quality or employee performance, as that can have serious negative side effects.

For starters, you can't judge how someone is performing based just on numbers. If you see someone logged more hours than usual for that type of work, it doesn't necessarily mean they're inefficient - maybe they're doing their job more thoroughly and is actually good because there will be fewer errors in the long run.

If you decide to use time data for evaluation, expect that people will game the system and cheat on timesheets. It's just human nature and instinct for self-preservation. They'll either under- or over-report the time worked, depending on what makes them look good in a particular scenario, and you'll end up with useless timesheets that have nothing to do with reality.

If you want to use time tracking data for performance evaluation, take the data as conversation starter instead of quota. This way, you can learn the why behind the numbers, gain trust, and improve your business processes.

25 • Management & administration

Limit choices and data access to ease cognitive burden

Even if you have a general policy of openness, you can use permissions and roles to make it easier for employees to track time and managers to run reports.

When you have a lot of projects and tasks, it's a good idea to limit the selection for end users, so they don't have to waste time finding the right one. The goal is to give each person access to only the items that they might actually work on.

You have several strategies for limiting the number of choices:

• Let people mark their most used projects as favorites so they appear first
• Assign people to tasks so others don't see other people's tasks
• Archive finished projects so they don't appear in project picker
• Mark tasks as done so they don't clutter your projects

Although this requires a bit of administrative work, each minute you invest here can save a hundred times more for the whole company (as the entry process becomes faster and easier for hundreds of people).

If you're thinking whether someone really needs access to something, it's better to err on the side that they'll need it - otherwise, people will waste time on asking for access and you'll waste time on granting it.

Some companies are so big that transparency is counterproductive. After all, a manager in one department doesn't really need data from every single department, and it only clutters their report.

That's why it's good to compartmentalize information, either around workspaces or user groups.

For example, you can assign people to groups and groups to projects, so you can control project access from one place. Or, you can create a separate workspaces for each departments so data doesn't mix.

26 • Management & administration

In most cases, employee monitoring is bad

Trust-based time tracking is better than monitored time tracking, especially if you're dealing with knowledge workers. Companies that don't use surveillance techniques are more conducive to collaboration and are better at fostering creativity.

Also, knowledge workers tend to avoid companies that use employee monitoring and privacy-invading tactics (like taking random screenshots or measuring a number of keystrokes), as those tactics are associated with toxic work environments (think call centers).

If you have remote workers, you might be tempted to use monitoring. After all, if they're not in the chair, how can you be sure they're really working? That's just irrational fear. Think of it like this: just because someone is in the office doesn't mean they're actually working.

The solution? Don't hire people you can't trust. And if you do trust them, but want to make sure they're working, talk to them and track their work based on results - and not by how much time they've tracked.

It's always the best practice to clearly set expectations than to micromanage. When you treat people like trusted professionals, they act like it.

But, in a few cases, monitoring can a good idea. For example, if your business relies on a lot of temp workers, and there's a high employee turnover rate, trusting everyone to be honest can be risky, especially when a person is paid by the hour.

27 • Management & administration

Lock timesheets for previous months to avoid misunderstandings

Everyone should be able to change their time entries. This flexibility is better than requiring people to ask for approvals when all they want to do change a typo, attach a missing tag, or nudge a minute to make the entry nice and round.

But, there's a point when you don't want things to change anymore and after which period timesheets are locked.

This is not out of fear that someone will manipulate or wreck the system. This is for archival purposes.

Once timesheets are locked, you can safely send the client or payroll the report, sure that things won't change anymore.

More importantly, people will know that there's a cut off period and that they should get their timesheets in order.

Misunderstandings often happen when a worker fixes the miscategorized time entry, and later the accounting can't figure out why some project is missing 8h.

28 • Management & administration

Name projects consistently

If you don't have standard names, people will waste a lot of time searching for them and thinking how to categorize their entries. The goal here is to organize the items in a recognizable hierarchy, so that categorizing time entries is fast and easy.

When you have a lot of projects, it's important to name them consistently. Usually, it's best to leave project creation to admins. But, if you allow others to create them too (which is necessary in organizations where things move fast), you should have a naming standard in place.

For example, you can define a naming convention according to which every internal project starts with an asterisk (*Internal product, *Office), every client project starts with the first 2 letters of client name (MSFT, GOOG), or that every internal project ID is included in the name of the project h2>P1).

You can even include a special project called "Office", with tasks "Emails" and "Meetings", or create an "Uncategorizable" project, which can be used as an idea pool when creating new projects.

If you have a lot of projects with same task structure, create a template and then create new projects from it in just a few seconds.

29 • Management & administration

Standardize and document the process

Once time tracking is an integral part of your business, you need to standardize the process, policies, and expectations. You can keep the time tracking guide in your company's wiki or an online document.

When a new employee arrives, you can point to the document during onboarding, so they know what's expected of them.

The standards document is also useful for existing employees, as it can answer their dilemmas like:

• How to classify time I spend on writing emails?
• What about helping others? What should I track that time to?
• When should I use tags and when tasks?
• How to track time I spend juggling multiple projects?
• What if I do some research that's related to two different projects?

You should start working on the document as soon as you have some basic system in place. Then, you just update the document with improvements, new stuff, and FAQs.

The document should contain:

• What time to track, to where, and why
• Guiding principle to be used when rules aren't explicit
• What the minimum requirements are for time entries and who checks them
• How do projects get created
• What happens when an employee leaves
• Time tracking best practices you've discovered