| In today's highly competitive business
environment, companies must seek to maximize their return on assets, investments and
resources; yet many organizations often fail to make use of a key strategic weapon - time.
Time is as critical as money; nonetheless, many companies are not accustomed to allocating
and investing it with the same level of care. The notion that "time is money"
may be better phrased as "time is capital." Time must be managed, accounted for
and invested in ways that maximize return.
This is often easier said than done, as companies seldom
possess the right processes and infrastructure to make the most of time resources. Often,
they confuse the core business process of time resource allocation with simple
"timesheets" or "time management calendars." This is as dangerous as
confusing a simple check register with a company's capital investment strategy. To
allocate and manage any resource, one must first see it clearly by tracking it carefully.
Hence, time tracking should be a fundamental part of any business.
Certainly, every business already tracks time at some level
- even if only for payroll. The most successful businesses, however, understand that time
tracking is a core business process, and they use that process effectively. "But We
Already Track Time."
Time tracking is a far more powerful profitability tool
than many people realize. Almost every company has some sort of time tracking system in
place already. Many are simplistic homegrown systems based on spreadsheets. Worse still
are those that are paper-based. Even companies that have fully automated time tracking
systems in place may fail to use them to drive profits up and costs down. These companies
do not understand how to gather and leverage time data to their greatest advantage. This
process is neither as easy nor as obvious as it seems. Some companies may understand the
potential gains associated with managing time as an asset but lack the right knowledge or
tools. Many others succumb to a misinformed and needless distrust of time tracking. Still
others mistakenly believe that time tracking systems are simple, and develop or buy
inadequate systems that fail to deliver real value to the entire enterprise. An expertly
developed and finely tuned time management system can become a window into the real-time
costs of any organization.
Such an application provides:
- A deep understanding of true costs at every level of your
business Ñ at a team level, a task level, a project level, a business unit level, and a
company level.
- Complete visibility into these costs for everyone who can
impact those costs.
- The power to re-deploy and shift time resource investments
to optimize processes, reduce risk, thwart competition, drive revenue, and increase
profits.
These advantages rest on a foundation of timely, accurate
and meaningful time data. Time is a fundamental driver of cost; therefore, time tracking
and management are cornerstones for building success.
The Relationship between Time and Cost
Understanding time resource allocation gives companies a
clear view into their true costs. While identifying costs is nothing new for most
companies, many experts agree that traditional cost accounting methods may not yield the
right information for some of the most vital initiatives that companies undertake, such as
competitive strategy formulation and execution or project portfolio management. Having an
old-fashioned understanding of costs is not restricted to any particular industry. Many
cost accountants are still using costing methods that bear little resemblance to how real
costs behave in the real world. Traditional cost accounting methods provide a high-level
quantification of average costs for average products. These old-fashioned techniques may
do an adequate job for preparing financial statements, but they invariably fail in
identifying cost for the many companies that have few products that are truly average.
New ways of understanding costs, such as activity-based
costing, have emerged to help companies redefine and realign their strategies. Yet these
new methods are only as good as the data that feeds them and time data is a critical
input.
The Four Business Functions To understand time tracking as
a core business process, first consider that time data feeds four fundamental business
functions:
- Payroll
- Billing
- Project management
- Business strategy development
These functions are impeded if the information systems that
feed them fail to provide the right data at the right time. Of the four functions, payroll
and billing are the most likely to be automated. However, companies that track time for
payroll or billing purposes may have systems that are ill suited for gathering the data
needed to improve project management and business strategy. The right time tracking system
will address all four business functions to provide the greatest value-enabling not only
the payroll and billing functions, but allowing companies to manage projects and formulate
strategies more accurately.
Project and Project Portfolio Management Companies may find
it difficult to know which of their projects create profits. An important first step is to
know whether projects are on schedule or within budget; however, this step alone is not
enough. Despite their keen abilities to remain within schedule and budget constraints,
project managers all too often find themselves out of a job when their projects, product
lines or research portfolios are deemed unprofitable or excessively risky. Budgets and
schedules alone won't make a company successful; only projects that create profits will
drive success. All projects, whether internal or external, must somehow drive the company
to greater profitability. If they do not, they will be cancelled. The companies that
manage their portfolios of internal and external projects skillfully - ensuring that all
projects help the company make money - will be the companies who survive and succeed in
good times and bad.
The hard truth is that no company can afford to mismanage
its project portfolio. Whether that portfolio contains two or two thousand projects, the
goal remains the same - profit. To reach this goal, companies need to be smarter about how
they collect and use critical time data to evaluate project cost and performance, allocate
labor and other resources, and estimate future project schedules and costs. They can
reduce risk of failure by understanding the true costs of their project in real time and
by taking necessary action sooner, when the chances of success are greater. The right time
data, accessible in real- time, is critical to solving project management problems.
The right time tracking system enables companies to manage
projects more profitably by allowing them to:
Control costs and increase profits:
- Monitor accruing expenses and catch budget overruns before
they happen by comparing budgets to actuals.
- Use historical data to prepare profitable bids in the
future.
- View all current expenses as soon as they are entered
- Track and report costs by projects and subprojects with an
unlimited hierarchy
- Attach project-specific pay and billing rate to employee
hours
Stay on schedule:
- Monitor project status and project milestones
- Coordinate extended documentation using interactive group
journals
- Exchange data through integration with project management
programs like MS Project
Leverage project information on demand:
- Use web-based solutions to make information available as
soon as it has been entered
- Enter and track time from any location
- Create custom project fields for free-form text, numbers, or
pre-populated drop- down menus
- Track historical data accurately with globalized activity
and task descriptions
- Collect all project-related data in a single program
Billing
Billing is usually either internal, such as groups that
charge their time back to a cost center, or external, such as consultants that bill
clients for their time and other direct expenses. Often, internal billing is sloppy or
lumped into a vague "overhead" category. This robs companies of the ability to
manage their internal investments. Worse, it makes cost reductions more painful, because
the data is not sufficiently granular to enable "smart" reductions. External
billing can also be a source of profit leaks. If the billing process is not optimized,
revenue recognition opportunities are missed. Client invoices are delayed when billing
systems are error-prone. Paper-based systems, as well as more automated methods that still
require "double-entry" of data, are good examples of billing systems that need
optimization. Not only must clients be billed at the fastest rate possible, but billable
hours and expenses should be tracked and managed carefully to prevent dropped bills.
The right time tracking system supports not only project
management, but also enables companies to maximize revenue by capturing time, expenses and
other products or services accurately so no billable items are lost or under-represented.
The right solution allows companies to:
Maximize revenues:
- Create customized interfaces for ease in employee acceptance
and compliance
- Eliminate double entry errors through online approval
routing and integration
- Flag individual entries with appropriate accounting codes
- Assign multiple billing rates to a single employee
Shorten the cash flow cycle:
- Enter time quickly and easily from any work location using
web-based technology
- Store all project billing-related data in a single program
- Generate and send invoices any time during the project life
cycle
- Allow clients customized access to project time and expense
reports
Leverage billing information on demand:
- Track available budget based on real-time information
- Enter any type of client billing information in customizable
fields
- Automate calculations by running reports based on customized
billing rules
Payroll Tracking time for payroll purposes means tracking
either time worked or paid time off. For many organizations, each pay period brings late,
missing or unreadable timesheets, repetitive data entry and complicated calculations for
employee pay rates and overtime or vacation rules. The right time tracking system, in
addition to supporting project management and billing, automatically feeds data to the
payroll process. It allows companies to:
Improve payroll systems:
- Set specific pay periods and calculations to fit the payroll
process
- Assign multiple pay rates to individual employees based on
the type of employment or work
- Correct prior period totals using negative and positive
entries for accounting records
- Export information into existing payroll, project
management, and accounting software easily
Increase productivity:
- Eliminate double entry by entering information once
- Automate workflow and manager approval of timesheets
- Schedule repetitive activities such as email notifications
- Define business rules for managing specific classifications
of work like automatic recognition of overtime and vacation accruals
Business Strategy Time resource allocation drives a
company's costs and directly affects its profits. Companies that do not see, clearly and
immediately, where time is being spent have less control over their destinies. It is not
enough simply to take a stab at the problem of accurate and consistent tracking time.
To win the game, time tracking must be treated as a core
business process, feeding both competitive and functional strategy development. What
remains unmeasured and unseen cannot be controlled. The ways leading companies manage
time-in production, in new product development and introduction, in sales and
distribution-represent the most powerful new sources of competitive advantage.
Whether a business competes through cost leadership,
differentiation, or by niche focus and specialization, effective strategy formulation and
execution depend on accurate data. Cost leadership strategies are commonly associated with
time resource allocation, since staff time is a key driver of costs. Differentiation and
specialization, however, are also highly time-dependent. In fact, most companies that
differentiate or specialize possess an unrealized advantage that can be tapped by a better
understanding of time consumption. Functional strategies also rely on time as a basic
performance indicator. To identify needed operational changes, optimize processes, improve
linkages between functional units, or manage channels, a company must start with a
truthful picture of its time distribution. The key to any business strategy, then, is a
highly detailed map of a company's time landscape. The right time tracking system enables
better business strategy and execution by:
- Supporting key decisions with the most accurate picture of
project and activity profitability
- Making time data meaningful in the larger context by
allowing maximum flexibility in the way data are collected, structured, and reported to
accurately reflect business realities
- Streamlining operations by integrating cleanly with existing
business-critical systems that rely on fresh, accurate time and expense data Sustaining
Advantage
Achieving a sustainable business advantage requires that
decision makers understand the true competitive and functional impact of time
expenditures. The vital, but often unrealized, need for realistic time data can be
embraced to create tools for change and growth. While mediocre companies look at their
businesses in the same old ways, skilled competitors wield the advantage of time, leaving
their rivals hopelessly behind. |
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