As a services person in legal, accounting, web design, consulting, etc, you’ve started tracking your time, and you are increasingly aware of the value of doing so, and that getting more hours billable means you get more profit. You also are acutely aware of the amount of five minute freebies that you and your colleagues may be currently giving away in support requests, such as phone calls, ‘quick emails’ or tiny website content fixes and the like.
You should know that these little tasks can really add up, and quickly too. It’s not just four minutes here, 7 minutes there. In some research, they found that approximately 15% of chargeable work was not billed to clients. This means, for an average Australian employee, who works the typical 220 days per year, at 7.5 hours per day, this equals a staggering 247.5 hours per year.
Repeat after me, time is money
Now, understanding that for those who bill by the hour, that time really is money, these employees are giving away 33 days worth of opportunity loss. If they are charged out at say a conservative $150 per hour, that’s a jaw dropping $37,125 worth of time you can never claw back.
Is it just your team knowingly wasting their time doing unproductive things, rather than working effectively to get more profit? Not usually. What it typically boils down to is one or more of the following possible issues.
Profit killing factors
The following three factors are often behind why people who bill by the hour, are just not billing enough per week, month or year. It’s not just long lunch breaks or spending too much time on Facebook, I assure you.
Poor time tracking processes
This is a battle every firm who tracks time has. People don’t like tracking time, people like to just round up/down and people like to decide who gets billed, when often it isn’t their responsibility.
Then there’s the ‘I’ll write it down at the end of the day/week’ people. Delaying adding time entries by a day, or even worse, a week, impacts the business on average by US$52,000 per year, according to this recent research.
Poor project/account management
This is where expectations around tasks and billables have not been clearly communicated and enforced with the client. Yes, we all know that if I ask my accountant or plumber or web designer to do something, this costs money. However, sometimes I am unaware if that money is part of what I have already been quoted or paid, or not.
Sometimes, employees will think they are doing the customer a service by just not charging, wilfully donating the time they are being paid. The issue here can end up being disastrous, if the client becomes trained to expect that. It is very difficult to return to a fairer model, if they have grown to expect constant freebies or unlimited project variations.
No viable invoicing method
This isn’t so much the time tracking software or process that you use, yet rather the gaps between various business processes. Some firms or agencies will have retainers for their more engaged clients, however many do not. So inevitably, the decision often becomes “if the client doesn’t have an active project with us, hasn’t got a retainer with us, do we go to the bother of asking the accounts person to write an invoice for 10 minutes work, then chase the debtor for payment, or do we just waive it?”.
They either send an invoice for a tiny amount, or for the half hour or one hour, depending on their policies, or they just waive it and the client is blissfully unaware. By doing so, you are losing that opportunity to get more profit, and even worse, the client probably doesn’t even realise you just willingly gave them some free advice or work.
A solution to the latter
If you feel you have an adequate time tracking system, you have regular reminders with your team to clock all of their time as to near real time as possible, then it boils down to how do you actually invoice these clients who slip between the cracks, so to speak?
What you need to find is a method in which you can get paid for these small increments of time, and yet at the same time you keep the administration of invoicing to a minimum — for your sake, as well as the client’s end.
A number of years ago at my digital agency, we embraced the idea of prepaid block hours. These have been a saviour for us, and we’ve managed to claw back many of the minutes and hours we previously wiped off.
We would easily have clawed back 50-100 hours per year, in 5-10 minute tasks. At $150+ per hour, that adds up real quick.
To make things even sweeter for our clients, we also offer a discount price to those who buy these 5, 10, 20 or 50 hour blocks. That’s a small price to pay to save the hassle and administrative pain of multiple tiny invoices, which are frustrating for both the payer and sender, believe me.
So now we just clock those 5-10 minute tasks to these blocks, and once the end has been used up, we can even send a detailed time sheet for the work we did.
If you don’t have something like this, yet you aren’t willing to send individual invoices for 10 minute tasks, then you are throwing out money and losing valuable opportunities to get more profit as a result. I urge you to try a method like this out; your team and clients and, importantly, your bank balance will appreciate the move!
Original version of this article was published 30 Apr 2011.