From Necessary Evil to Strategic Asset: Timesheets in Accounting
For years, accountants globally have meticulously logged their hours in carefully structured spreadsheets. But what drives this near-ritualistic practice and what advantages does it yield? Let's explore the significant benefits of diligent time documentation and how a properly established system can enhance your firm's efficiency.
What are the benefits?
The main asset of an accounting business is skilled working hours making it important to know how this time is spent. Timesheets provide structured data that can be used for invoicing, managing staff and client reporting. When prepared and used correctly they can have several benefits:
Increasing Productivity: With time-tracking tools, accounting firms can maintain high productivity and reduce time spent on non-core administrative activities. It is expected that an average accountant spends one third of their working time on non-billable hours, including administrative tasks, meetings, annual leave etc. Productivity information derived from timesheets can enable managers to identify non-performing employees as well as those whose performance is excellent.
Managing Staff: Maintaining detailed records of how time is spent allows for better management oversight without the need for micromanagement.
Prioritising efforts: time tracking aids small business owners and managers to focus on high-value tasks instead of getting bogged down by administrative work.
Accurate cost estimation: time tracking provides base data to estimate more accurately for future time and resource requirements, aiding in setting appropriate billing rates and providing clear client estimates.
Precise client billing: time tracking alleviates billing inaccuracies, allowing for detailed and justified invoicing that reflects the hard work put into client services.
Streamlined software integration: syncing time tracking with accounting software automates billing processes, increases efficiency, and maintains accuracy, leveraging the gathered data to generate and adjust invoices quickly.
Setting up your time recording system
1. Clarifying the Purpose of Timesheets
The driving question behind timesheet implementation should be 'why'. Whether it's to understand project costs, adjust effort estimates, or get a handle on workloads, the purpose must be clear—not only to you but also to your team. Misconceptions about monitoring can dampen creativity and productivity, so communicate the true intent: to benefit employees with balanced workloads and predictable schedules. If the goal is to claim tax credits or improve estimations, emphasize how this system benefits both the team and the company, turning a mundane task into a mutual gain.
2. What are the activities? Identify your project codes
Striking the right balance in detail is key. Too little detail and you may miss out on valuable insights; too much, and you risk overwhelming your employees. Start at the project level to monitor the hours spent without cluttering timesheets with minutiae. As you progress, finer details like deliverables may become necessary, but be cautious tracking an excessive number of activities can lead to tedium and decreased employee compliance.
Once you've established the level of detail you need, you can identify the projects, activities, or deliverables to track. They should differentiate between various services provided, such as accounting or tax work, payroll, or secretarial services. Incorporate tasks like support and maintenance that aren't project-based and allocate codes for administrative time such as holidays, training, or other absences. Always align your selection with the future information needs of your firm. For less detail, a catch-all category like "other" can simplify tracking miscellaneous time.
When the time reporting system links to billing, it is useful to have the correct descriptions for activities, including the years of service. For example, ‘Compilation of Annual Financial Statements, 2023’ can be a project code which can be set up in advance for the coming years, revised annually.
Example of a Project Code Structure:
Accounting
101 - New client take-on
102 - Cashbook processing
103 - Petty cash processing
104 - Debtors processing
105 - Stock processing
106 - Other current asset processing
110 - Creditors processing
111 - VAT Reconciliations
Tax Services
501 - VAT Registration: For all work related to registering VAT.
502 - VAT Return Filing: Time spent on completing and submitting VAT returns.
503 - VAT Consultation: For attending to VAT queries.
504 - VAT Reconciliation: Work involving VAT reconciliations.
Payroll Services
601 - Payroll Registration: Any task related to registration for payroll services.
602 - Payroll Processing: Regular payroll processing tasks.
603 - IRP5 Reconciliation: Activities related to the reconciliation of IRP5 forms.
604 - PAYE Processing: Processing PAYE for clients.
Secretarial Services
810 - Close Corporation Secretarial: Work related to secretarial services for close corporations.
820 - Trust Secretarial Services: Services provided to trusts, involving secretarial tasks.
830 - Company Secretarial Services: General secretarial services for companies.
Each of these project codes would be used when accounting staff record their time, ensuring that time is allocated correctly and that billing can be accurately determined based on the services provided. This level of detail helps maintain organized records and allows for detailed reporting and analysis of time expenditures across the business.
3. Setting up client codes
Client codes are a way to efficiently identify and manage client information within a business. They should be set up as unique to enable the identification of clients. When setting up client codes, the goal is to create a system that is both logical and scalable, ensuring that new client codes can be added without confusion. Here’s how you might set up client codes based on the examples provided:
Examples of client codes:
ANO1 - AN Other
BEC1 - Mr BE Contact
SAR1 - Mrs SA Rasputin
TIM1 - Time and a half (Pty Ltd
Considerations when setting up client codes
Make them unique: Each client code should be unique to avoid any mix-up in client management processes. Ensure that the code structure can accommodate new clients without duplicating existing codes. If a new client with the name "Timothy" comes in, their code could be "TIM2", indicating they are the second "TI" client.
Ease of Reference: Codes should be easy to remember or should quickly bring the client to mind for those using the codes regularly.
Consistency in Format: Choose a standard format for all codes. For example, the format could be a combination of letters and numbers where the letters often represent an abbreviation of the client’s name or their initials, followed by a unique number.
Examples of client codes:
ANO1: AN is taken from the name of the company: “AN Other". The "01" can signify that this is the first client starting with letters "AN" in your system.
BEC1: "BEC" represents the first letters of the name "Mr BE Contact". Similarly, "01" could indicate that this is the first client with these initials in your records.
SAR1: "SAR" are the first letters taken from "Mrs SA Rasputin", with "01" following the same logic as above.
TIM1: "TIM" could be derived from "Time and a half (Pty Ltd)", with the "M" possibly standing for "Management" or "Pty Ltd", and "01" indicating this is the primary account for this client.
4. Timesheet information
Employee Details:
Employee Name/ID: Identifies the individual completing the timesheet.
Position/Role: Helps in assigning the right billing rates and responsibilities.
Department/Team: Useful for project and departmental cost tracking.
Date and Time Tracking:
Date: The specific day the work was performed.
Start Time and End Time: When the employee began and ended their work, respectively.
Total Hours: Automatically calculated from the start and end times.
Project and Task Details:
Project Code/Name: Links the time spent to a specific project.
Task Description: Brief description of the work performed, which helps in assessing the progress and nature of work.
Billability:
Billable vs. Non-Billable: Indicates whether the hours should be billed to a client or are for internal purposes.
Hourly Rate (if applicable): To calculate the total charge for billable hours.
Supervisory Approval:
Supervisor’s Name/Signature: Ensures that the work and hours reported are reviewed and approved.
Date of approval and billing: The date on which the timesheet was approved and billed to the client.
5. Select the right system
Begin with a thorough review of how your firm currently manages time. Spot the strengths and identify weaknesses, especially in areas like how long tasks take, how resources are spread out, and the way client billing is handled.
Select a time-tracking solution that aligns with your business's unique needs. Your choice might range from a basic Excel sheet to a full-fledged software subscription. Look for key features such as ease of use, system compatibility, live tracking, and accessibility on various devices. CIBA partners, QuickBooks or Smartpractice offer incredible deals for practices.
6. Lastly…
Set up clear rules for logging time. Everyone on your team should understand what counts as billable versus non-billable hours and be adept at categorising different activities.
Ensure that employees can navigate the time-tracking tool with confidence. Highlight the crucial role that precise time logging plays in both billing and project oversight.
Sync your time tracking with other business systems, like payroll and invoicing. Doing so can streamline workflows, cut down on the manual data entry, and limit mistakes.
Finally, make it a habit to regularly review the data captured by your time-tracking tool. Use these insights to refine your approach, making tweaks to the system or processes to boost both efficiency and precision.
Time Reports for More Effective Management
A timesheet system can offer a range of valuable reports that can greatly enhance business management and operational efficiency, including:
The Timesheet Report provides a detailed log of all recorded hours, helping to track employee activities and time spent on specific tasks.
Summary Recovery % Per Client and Summary Recovery % Per Item offer insights into the percentage of billable versus non-billable hours, helping firms to assess their billing efficiency and adjust their strategies accordingly.
The Client Profitability Report is crucial for analyzing the profitability of each client, identifying which relationships are most beneficial.
User Productivity Report measures individual employee performance, highlighting areas where productivity could be improved.
The Invoice Recovery Report tracks the amount of billed versus paid work, crucial for monitoring outstanding payments and overall financial health. These reports collectively provide a comprehensive view of company operations, client relationships, and financial status, enabling better decision-making and strategic planning.
Give time management a try using CIBA’s Excel Timesheet Template.
