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Every business that sells a physical product is constrained by inventory. They can’t sell more than they have in stock without putting sales on back order or issuing refunds. Take a bike company, for example. Once they’ve sold out of a model, they have to manufacture more, which delays sales.
Professional service agencies operate under similar constraints. Regardless of whether or not they bill hourly, they operate with a limited inventory of time. But, when time runs out, they can’t simply manufacture more of it. Unless they can quickly hire on more help, or outsource the surplus work, an agency in this bind will find themselves delivering projects late to disappointed clients.
Continuing on with the analogy, a business with a physical product will employ software for tracking and managing inventory. By keeping an account of their stock, they know what they can and can’t sell, so they won’t over promise or under deliver.
So it should follow that a professional services agency would also employ software for tracking and managing their inventory — their time. And if your agency is not currently doing so, consider just a few of the following benefits to be had when an agency uses online time tracking software in their day-to-day workflow.
More accurate estimates
It’s difficult to accurately estimate a project when all you have to work from is a scope document. The most accurate way to estimate a project is to reference how much time was required to complete similar types of work historically. Agencies that track their time can apply their own time tracking data to the estimating process and reduce the margin of error to less than 5%.
Our own software, Intervals, does this by estimating and tracking time on individual tasks. When this cycle of estimate-track-analyze is repeated at the task level, it creates a trove of useful data that makes it much easier to piece together estimates based on actual past work.
Fewer missed deadlines
If the agency does not bill hourly, it’s still important to have accurate estimates to rely on. Flat fee projects are limited by the availability of people and their time. An error in estimating will result in late projects and overworked people.
Estimating, however, is only the first step in delivering a project on time. The ability to keep track of a project’s progress in real-time is critical in seeing it through successfully. When time is managed and tracked properly it’s easier to avoid surprises midstream, because they become visible a mile out.
Increased profits
Running a profitable agency is a much more attainable goal when you know the margins on each project. If an agency is not managing and tracking time, they are likely taking a “win some, lose some” approach and hoping they’ll break even at the end of the year.
The ability to estimate, track, and analyze each project gives an agency a clear advantage in increasing their profits. Not only can they steer each project toward profitability in real-time, they can quickly identify and learn from their mistakes and apply those lessons to the next project. It’s an iterative cycle, a feedback loop, that helps an agency grow project by project, not year by year.
Less wasted time
Every agency has waste, but it can be difficult to identify where time is slipping through the cracks. When an agency becomes proficient in tracking its time, the cracks become easier to find. For example, there might be a client that requires a lot of focus and mental energy, but doesn’t bring much billable work to the agency. Analyzing its time tracking data, the agency could consider letting the client go and finding another better matched client. When an agency knows exactly where its time is going, it’s much easier to identify and address waste.
