Tracking Your Time - continued

Interpreting the Data

My daughter, Amber, is my office manager. She enters the time card information into our MYOB computer accounting program. You could track the information manually, but I wouldn’t want to try. The variety of reports and information you can generate from an inexpensive accounting program is priceless, but make sure the software you choose has a time billing module.

Amber starts by running totals on each card. She brings each daily total to the bottom of the page and each task total to the extreme right. She adds those both horizontally and vertically as a cross-check. Then she goes to the program’s time billing function, where she’s created a coded list of activities matching those on the time card. She enters totals by employee and client. She also enters each employee’s total hours into the payroll function of the software and cuts the paychecks.

Reports. Once the time card information is entered into the program, I can run a variety of reports. I can tabulate the information in date ranges with totals by task, customer, employee, and hourly productivity. Those reports are invaluable for assigning worker’s compensation rates, which vary by type of exposure, and for revising my estimating assumptions. I can also view cumulative payroll information such as employee earnings and tax liabilities.

In the time billing module, the employees all have a rate assigned to their billable hours (see “Calculating Labor Costs,” 2/02). You can set this rate as a gross hourly wage or as a wage plus burden. You might even set an inclusive rate that amortizes your overhead and profit. It’s up to you. Our bill rate includes the employees’ wages and burden. This enables me to keep an eye on our overhead and profit separately when comparing revenues to hard cost.

Nonbillable time. Overhead can be tricky to calculate. Every business has tasks that aren’t directly job related or billable. Soft costs such as phones, office supplies, and advertising are easy enough to figure, but how do you know if you’re being compensated adequately for the nonbillable hours you invest in your company? I’ve created a list of nonbillable activities on a second, modified time card to track the time spent on administrative details (Figure 2). Those hours are sometimes the most difficult to categorize. We track that time just like we track production time — it isn’t invoiced, but I consult the data to adjust my overhead markup as needed. By tracking nonbillable time as well as the production hours, I can gauge how much I’ve invested in my business and in what capacity. First and foremost, the purpose is to make sure that I’m sufficiently compensated. And, when it comes time to replace myself in a function, I’ll have some data related to the requirements of the position.

Figure 2.Identical to the job time card, the author’s nonbillable time card tracks administrative time by code numbers related to overhead expenses.

It takes Amber about 45 minutes to an hour per week to do the time accounting for six to seven employees. It’s a small price to pay for the wealth of information generated and the handy reports I can produce at a moment’s notice.

Invoicing for Time

Amber invoices each client’s account for the time we spent on that project during a given pay period. If we’re working a fixed-cost contract, this is merely an accounting function. The resulting invoice is deducted from the client’s retainer account. (Our construction draws usually come before, not after, the construction.) When that account gets low, we’re alerted to invoice for the next construction draw. On the rare occasion that we work a cost-plus contract, the time cards serve as documentation of actual expenses.

We use time billing invoices to update our clients’ “Job-Cost Card,” an Excel spreadsheet I use to compare my estimate to the actual job costs (Figure 3). We import labor, material, and subcontractor expenses weekly, in order to catch possible overruns early in the process. If there’s action I can take to change the outcome, I’ve got a chance to implement it in time. Otherwise, I can kick myself in the butt for the balance of the job and correct for the shortfall on future estimates.

Figure 3.Weekly imports of time card information to a Job-Cost Card help catch potential labor overruns while a job’s still in progress.

Post mortem. At the close of a job, or the end of a project phase, I perform a post mortem to see how my estimate compares to reality. I might break down a simple assembly item, such as floor framing, by unit costs for the sub-sill, joists, bridging, and sheathing. But the broad categories of the time card aren’t going to tell me exactly where to look for the source of a variance, only that there is one. I’ll review a variance with crew members and review the notes on my desk calendar to determine the nature of delays, then update my unit costs accordingly. The averaged costs in estimating manuals and software are great, but there’s nothing like having your own personal database of numbers. I use the post mortem to generate, refine, and confirm our pricing.

The post mortem also allows me to see, in an impartial way, which employees are better suited to which tasks. If I know which employees are faster at which activities, I can allocate my employee resources more efficiently. The history is also valuable when it’s time for performance reviews and bonuses.

Bonus time. In December, we give our employees a bonus that’s commensurate with the hours they worked during the year. This encourages them to report for work every day and stick out the year. The hours are banked every week and recapped on their pay slip. The bonus is calculated at hours times 15¢. This typically results in a couple of hundred dollars just for good attendance.

Worker’s comp. Every year, we’re audited for our worker’s compensation exposure. If we simply lumped all our time into our highest governing class, of Carpentry – 1&2 Family Dwellings, Code 5645, our rate here in Tennessee would be 16.36%. By documenting our actual exposure, we’re able to reduce our yearly premium — all of our time isn’t spent doing general carpentry. We also have significant hours in Concrete Work (rate 6.74%), Trim Carpentry (rate 8.76%), and Painting (rate 9.46%), among other tasks. The lower percentage premiums in those classes save us thousands of dollars on our yearly premium against a flat accounting of hours.

By far the most useful benefit of tracking your time is in determining the rates that your business charges for its services. Tracking our time keeps me from making the same mistakes over again.

Systems don’t have to be complex; the easiest solutions are often the best. Our time card was simple to create, and it’s easy to maintain. It provides us with information essential to the well-being of our business. Estimating is risky enough; we’ve amassed a history to help chart our way.