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Time tracking: Best practices

Last updated: June 1, 2022

Best time tracking practices

Time tracking has the potential to bring substantial rewards to your business if done right. Unfortunately, in most businesses it is implemented sub-optimally. Taking the time to figure out what you are trying to achieve with the process, and how to make it as simple and error-free as possible, is well worth the effort.

In this article, you’ll learn:

We are releasing a series of articles on the topic of time tracking for a good reason: it can’t be addressed in a single neat checklist. time tracking is an art as well as a science, and a complex one at that. 

That said, there are some common errors, and corresponding best practices, that anyone considering implementing a time tracking system at their company should be aware of. In this article, we try to group these best practices to make them easier to navigate. 

Here goes!


It might seem strange to use the terms ‘strategy’ and ‘time tracking’ together, and it is certainly possible to treat time tracking as a question of operations.

Time tracking has massive potential to help you observe, improve and monitor how your business functions in the front, middle and back offices. Simply using it as a billing tool is missing out on this opportunity.

Most of the serious problems with time tracking systems can be traced to the start of the process when the thinking about the underlying why was - or was not - taking place.

Why categories are key to strategy

Choosing the right categories - that is, how your employees classify their time (project work, business development, admin, etc) - is key to time tracking success.

Why time tracking categories are key for strategy

Typically, there is a hierarchy to the classifiers used. For example:

  • Categories: the highest-level classifier (Marketing, Project X)

  • Tasks: Steps within a category (Webinars, Wine-tasting event)

  • Tags: Help classify according to an additional dimension (Billable / Non-billable, Client Y)

Typically less is more and more is less. Judgment is required, meaning that you have to think through why you are tracking time. What do you want to find out? What do you want to test or confirm? Every category should provide the answer to a question.

What bad looks like

Let’s start by describing what happens when the correct process is not followed.

Common mistakes in time tracking

Here is a list of the tell-tale signs that you are on course for time tracking dystopia:

  • Large number of categories: Employees are presented by management with a bloated and ever-growing list of categories against which to bill their time.

  • ‘No bad ideas’ mentality: No thinking has gone into this list besides a general sense that the categories would be ‘good to track’. It is simply the output of a brainstorm.

  • Detailed descriptions: As if to compensate for the lack of thought, the employees are also expected to write detailed descriptions of every task.

The result is a gigantic spreadsheet of time tracking data and no obvious insights. Analyzing this data requires someone to examine each time entry and attempt to superimpose some kind of order on to the chaos retroactively. Which, needless to say, no one attempts.

Choosing the right categories

There are almost countless questions you can ask using categories and time data.

How to choose the right category for time tracking

Here are just a few examples:

  • Task/Process-level: Do you suspect that a certain step in your process (e.g. customer onboarding) is taking too long to complete?
    Create a category for the task, measure the average time, and then enquire about the fastest and the slowest case. What went wrong, what went right, and what should change?

  • Individual-level: How do you think your employees should spend their time?
    Ask them to bill their time to the most important categories, and see if the reality matches your expectations. See how it differs from individual to individual and figure out why.

  • Project level: How long does a project take to complete versus your original estimate?
    Break down the project into stages and track them. If you are underestimating the time required, charge higher fees. If it is a specific, outsourceable activity, calculate how much you could save by contracting out.

  • Client level: Are some clients more demanding than others with additional requests?
    Create an “out of scope task” category and encourage your staff to bill to it instead of putting it down to “Overhead”.

There are countless other strategically important insights potentially within your grasp. For example, you might find that a significant chunk of non-billable time (e.g. client meetings) could actually be billed, and immediately calculate the revenue impact of making the change.

Category checklist

When you have your list of categories, you need to ensure that they are ready for use ‘in the field’.

Time tracking category checklist

Here is a checklist:

  • Mutually Exclusive: do not overlap with one another
    For example, “Admin” and “Overhead” could easily be confused. In this case, the description would need to be clearly documented somewhere, or else the two activities merged into one.

  • Comprehensively Exhaustive: cover every possible activity 
    In practice, there will usually be an all-purpose ‘Other’ category. If this category contains a large number of hours, it is likely that it should be further sub-defined into more informative categories (e.g. Training, Office Management).

  • At the same level of abstraction: similar in scope and level of detail
    E.g. Marketing is broad, whereas Re-stocking the soda cabinet is clearly very narrowly defined. The former would be more appropriate for a Category, whereas the latter might be a Task.

  • Strictly limited in number: do not exceed a manageable amount
    To force discipline (and for usability) having no more than 8-10 non-billable categories is important. For billable activities, categories will be naturally limited by the number of projects.

Profitability tracking

One of the harder metrics to track is profitability, both relating to projects and the clients.

Two types of profitability tracking

There are three ways to track profitability using time tracking data, increasing in sophistication:

  • Simple: for a fixed-price project, compare the hours incurred (including business development time) versus the hours assumed when the fee was calculated. If the former exceeds the latter, your effective hourly rate will decline, and with it your profitability.

  • Advanced: By incorporating the hourly cost of resources into your calculations, you can determine the profitability rate, and optimize the team mix to improve your chances of improving this figure on the next project (or increase your hourly rates accordingly).


Winning over the team

If you are introducing time tracking, or even if your team is already used to the practice, you may encounter reluctance, resistance, and skepticism as to whether the task actually has a point to it, or is simply bureaucratic “busy work”.

A sign that you are facing this problem is how the team reacts when you ask them it is important why they track time. If you get blank expressions, shoulder shrugs, or eyerolls, you have work to do.

How to win over the team regarding time tracking

Co-create the system

Explaining the strategic goals (see above) is obviously important to give the team a sense that the process has a point to it. Better yet is to co-design the categories with your employees, and to revise them regularly as a group exercise. 

Tease out the questions that they want to answer (e.g. how much time is wasted on Task X). This not only gives them a stake in the outcome (as they are part of the ‘game), but it will also give you more effective input and feedback. On a one-to-one level, time tracking goals can be incorporated into personal objectives (e.g. billability, hours devoted to BD, etc).

Make the results transparent

How far to go with time data transparency is a judgment call, as it could have unintended consequences (e.g. destructive competition, tension between colleagues). Showing overall adherence to time tracking practices across the team is, at the very least, a way of showing a slacker that they are an exception, and are letting the side down!

We advise strongly against using surveillance techniques (keystroke monitoring, random screen capture) to as it were force compliance, as this is bad for trust and may not ultimately even be effective in delivering reliable results. Transparency means trust in both directions.

Document your policies

There is nothing quite so damaging as having to apologize to or worse still argue with a client who believes they have been billed incorrectly. Nothing, perhaps, except failing to bill for work that genuinely added value. Both result from poor communication of your policies to your staff, who are, as a result, inconsistent in how they record their time.

Implementation of good time tracking practices: Document your policies

Employees should be aware of how to bill (e.g. agreed approach to rounding of time), what to bill for (e.g. emails to clients), and other policies such as how long breaks should be and how to correct entries made in error. This requires you to document and convey these guidelines and ensure they are accessible, and that new employees familiarize themselves with them early.

Make the process foolproof

Even with clearly documented policies, things can still go wrong. A 2018 study found that 92% of timesheet errors were due to user error, typically forgetting to log their hours. Missed time entries have to be followed up on by another resource, and much time is wasted. 

The best way to prevent things from going wrong is to make it easy for them to go right. Here is a list of measures that can eliminate problems before they arise.

How to make the process of time tracking foolproof


While you should be wary of solutions that rely too heavily on AI, automatic features can be helpful in countering predictable human errors. Reminders (when a timer hasn’t been turned on) auto-disable (when it has not been turned off), and more advanced features such as Pomodoro can make life much easier, and can be shut down if they are not helpful.

Giving the whole task of time tracking - including categorization of tasks - to AI is not such a good idea, outside the narrow remit of recording how much time has been spent on certain sites or within certain types of file.

Frequent tracking

It’s an ongoing debate whether using a real-time timer is preferable to periodically updating a timesheet manually. The rule of thumb is that if you need accuracy but not precision - such as tracking for compliance or payroll purposes - then manual time tracking is sufficient.

However, if you choose the manual approach, you should encourage workers to book their time daily, as leaving it until the end of the week runs the risk of inaccurate data. People are in general poor at estimating time, and this obviously worsens with distance.

Locking timesheets

While it is good to allow a period during which employees can edit and correct mistaken time entries, it’s good practice to freeze the data after an agreed interval, ideally before the data is used (for analysis or billing). This not only avoids reconciliation problems, but also incentivizes users to book their hours sooner rather than later.

Simplified choices

Cumbersome processes create errors, so simplifying choice architecture is a no-brainer for improving the quality of your time data. Generally, this means getting rid of stuff! For example:

  • Showing people only the projects or tasks they are working on or tagged to

  • Archiving completed projects/retired categories so that they no longer appear

  • Ordering the lists so that the most frequently used items are seen first

If you are - as is likely - using software provided by a 3rd party vendor, you should make the above points a part of your due diligence.

Required fields

Required fields are a powerful way to ensure that certain data points are collected. However, it is important to ensure that only the most vital data is made mandatory in this way. In other words, your aim should be to minimize the number of required fields. Focus on quality over quantity, or you will end up with the reverse!


While the above features will improve your chances of success, you can never reduce errors to zero. That’s why, for accounts where there is no room for error (or where an error has already taken place, and no further mistakes can be afforded!), adding a mandatory a human approval step (by a manager or other designated person) is advisable.

Constant improvement

Tracking the data is an important step, but you also need to use it! That means analyzing the results against the original objectives you had for gathering the time data in the first place. Ideally, your time tracking solution will have a number of in-built analytical reports that you can use for reporting and internal analysis.

How to strive for constant improvement in time tracking

Through this analysis, you will gain insights that will help improve how you serve clients and how you run your business. You should also be open to insights about how you are tracking time itself (for example, if untracked hours are rising, something may need to be fixed).


This all sounds like a considerable amount of effort, doesn’t it? Initially, it might be, particularly if beginning with an employee base that is used to a more perfunctory approach. However, considered another way, running a sub-optimal time tracking approach may be easier, but delivers far less return on effort.

Time tracking is about self-knowledge, and as the sages teach us, self-knowledge is key to victory. Taking the time to think strategically about what you want to get out of time tracking, and practically about how to implement it, will result in a business that is nimbler, more grounded, and more successful.

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