Best Practices for Time Collection Management in the Project-based Professional Services Firm

If a professional services firm can do just one thing to improve business profitability, I would urge them to require electronic daily time entry by employees. I share this with our clients regularly and frequently get the response that this is an impossible process to implement.

The firm’s culture and unwillingness to enforce company procedures is one of the major reasons that our clients continue to suffer with inaccurate timesheets, lost extra services, as well as slow and incorrect client billings. This is actually the easiest and most cost effective change you can make immediately which I promise will produce instant positive and measurable results.

If you think about it, as a labor based organization, every minute counts. Once time is gone you cannot get it back. How many of you can remember what you did yesterday in ten or fifteen minute increments (I can’t)? Think of your employees’ time as very valuable inventory that you have to protect. If you had a warehouse full of gold, you would build a secure storage facility, get armed guards, and buy insurance to protect this valuable asset. But with employees’ time, we consistently allow it to get thrown away. Time is inaccurately recorded or wasted with excessive meetings, poor management of the contract scope, or by allowing employees to mismanage their time or record it incorrectly because they are filling timesheets out weekly, bi-weekly, or even worse, monthly. You need to start thinking about your employees’ time as a precious asset and protect it at the same level.

One missed 10th of an hour each day translates to 23 lost hours a year. And failure to keep current, proper time records will usually result in more than just 1/10th of an hour lost … DAILY … and MANY thousands of dollars in lost billable revenue! Source: Law Biz Blog, 9 December 2008

The reason that timesheets are so critical to your business performance, especially revenue, is that timesheets pervade almost every single facet of the business. Timesheets affect all of these areas:

o Project Reporting
o Billing
o Payroll
o Financial Statements
o Overhead rate calculation and allocation
o HR – Benefit Accruals
o Utilization reporting
o Revenue recognition
o Project Management effectiveness
o Scheduling
o Employee performance analysis & compensation
o Project Scope control and ability to bill for work outside the scope (extra services)
o Government Contract compliance & reporting
o Client satisfaction and trust in your billing and reporting capabilities

As you can see from this list, timesheets affect so many different aspects of the business, tightening up loose processes and enforcement of better policies will have a profound effect on the entire firm. So, how can you do a better job of enforcing timesheet policies and ensuring that timesheet entries are more accurate?

Below are some best practices that we have learned over the last 20 years which have been successful for many of our clients. In evaluating your current processes, you can develop better methods for implementing timesheet policy, enforcing these policies, and controlling employee behavior.

o Develop a documented timesheet entry policy which employees are given upon being hired. These policies should include a detailed description of all aspects of the time entry process including making changes to timesheets and the company’s submittal and approval processes;

o Explain to employees how critical their timesheet is to the entire profitability of the firm. It is amazing how many employees do not make this connection;

o Provide user training on timesheet entry and approval processes for managers;

o Require daily time entry and enforce;

o Limit the number of choices they have on the timesheet. Do not give them large lists of codes to select from;

o Inactivate Phases / Tasks under the project when they are completed. This will help to increase accuracy and potentially capture extra services;

o Implement an approval process which checks to make sure that all entries are to the correct projects and charge codes and within the scope of the contract;

o Require project managers to budget projects at the phase / task and employee levels and integrate project assignments with timesheets to show employees where they are assigned right in their timesheet;

o Implement workflows and alerts to warn about project overruns, employees charging to the wrong projects and activities and warn employees when timesheets are due to be submitted;

o Make employee’s bonuses and / or other incentives dependent on strict adherence to all company policies;

o Remove an employee from payroll direct deposit if they do not get their timesheet submitted on time. We have found you will usually only have to do this once;

o Take the employee’s paycheck to Wyoming (not legal but threatening this will definitely scare them – Ed Kroman, Summer Consultants).

I am sure that many of you have tried other things that have worked and we would love you to share your ideas and success stories with us. To contribute additional best practices or to learn more about how you can improve your timesheet management processes, please contact me at june@jewellassociates.com. To learn more about Jewell & Associates, visit http://www.jewellassociates.com.