Whether you bill by the hour or on a project basis, it's important to know if your services are profitable. This post explores how you can easily stay on top of your projects - making sure you're profitable and your clients are happy.
While some organizations bill by the hour, many use project-based budgets to simplify the bidding process and give greater transparency into pricing. Project-based budgeting can help set clear expectations for project scope, and for efficient organizations billing by the project can also lead to greater profitability and increased productivity. The challenge, however, is project time tracking.
Project-based teams need to track how much time they’re spending on the project so they can see how profitable the project is. For instance, if the proposal estimates $10,000 to complete the project, the project manager will want to make sure that their team’s costs to complete the project don’t exceed $10,000. In addition, if the project manager can reduce the hours and costs required for completion, then the project becomes increasingly profitable.
Tracking time in relation to an overall project budget is a critical process for managers and finance teams. However, many time tracking software solutions are not well-equipped to help with this kind of reporting. Even if they have project-based features, they rely on team members to manually input time, making them inaccurate and out of date. At Allocate, we’ve built project time tracking software that uses AI to automate the time tracking process, providing real-time, accurate reporting of project profitability and progress.
Why Project Tracking is Hard
Most organizations use some kind of time tracking software to keep up with employee hours. The capabilities of the different kinds of software vary, but many don’t provide project-based reporting, and most rely on people manually entering their time. The lack of reports and allowing only manual time entry make tracking project status a challenging endeavor.
First, people don’t really like tracking time, and logging time is hard. It requires people revisit their calendars, email history, and meeting notes to recreate what they did on a given day. The infrequent nature of time tracking in most organizations (weekly or bi-weekly), means the data is often inaccurate and out-of-date, which renders such systems useless for on the fly reporting and course correction.
Second, inaccurate and untimely data creates a problem when you want to build a report on your project status. You only have a rough estimate of the time your team has spent on the project, and that estimate is based on whenever everyone on your team last submitted a timesheet. This makes it quite challenging to understand a project’s profitability.
Allocate solves these problems with real-time, precise data and strong reporting tools. All so that managers and finance teams can make the right decision at the right time to propel their business forward.
Using Real-time Data for Project Tracking
Ideally, your solution should tell you how much of your project budget you’ve used at a given point in time. In order to do so, time entries need to be complete and up to date.
They also need to be precise about how much time people are spending on project tasks. We're well aware that timesheets are often created with broad strokes. Your probably familiar with it - 4 hours on project X, 2 hours on project Y, and 2 hours of non billable time. Though it may be easy to log time this way, what's being lost is accuracy. Such accurate data not only informs the project progress and margin of current projects - it also informs how future projects are estimated, which in turn effects the future profitability of your company.
Allocate integrates with your team’s existing workflow to passively collect data about how your team is spending its time and how projects are progressing. This data, combined with artificial intelligence, means Allocate helps you generate timesheets and project reports on the fly. The result is a precise, up-to-date understanding of where your projects stand at all times; and, since Allocate is web-based, you can access project time tracking reports on-the-go from any computer, tablet, or smartphone.
Using Employee Cost to Determine Profitability
Project time tracking can also tell you your exact profit margin on a project if you understand your employee cost. We’ve put together a detailed guide on the importance of knowing your real employee cost and how to calculate it, but we’ve also made things easy with a simple calculator where you can plug in your variables. Comparing what you’re charging for a project versus what you’re paying your employees to complete the project is the key to understanding a project’s profitability.
Understanding employee cost and other project expenses means you’ll be better prepared for proposals on similar projects. Allocate gives you the capability to review past projects for cost breakdowns and employee performance, meaning you can write proposals for new projects that are profitable, while still being competitive.
At Allocate, we believe good time tracking has the potential to make your organization more profitable, more productive, and happier. Automated timesheets using AI give you access to precise, real-time reports with the critical profitability metrics for understanding the health of your projects and business at large. Schedule a free demo to see what Allocate can do for your organization.