Increase Profit Using the Right Time-Tracking Software for Small Businesses (With Examples)

Your team’s attendance data and work patterns can make you a truckload of cash.

That’s because time-tracking reports can provide all the information you need to turn money-draining projects into profit engines. 

From seeing apparent differences between estimated and actual workload hours to spotting productivity flaws, you can finally start making the right decisions for your bottom line.

According to a study by the MIT Center for Information Systems Research, organizations that access real-time operational data outperform slower peers by nearly two times (97%) in profits. These results can appear quickly as well.

We’ve seen businesses increase their annual revenues and expand their teams within a year of implementing time tracking. 

Keep reading for practical steps on using time-tracking software for small businesses to increase profits. I’ll include a case study and show you how to transform your margins without invading employee privacy or breaking their trust.

How Does Time Tracking Help Small Businesses Increase Revenue?

Effective time-tracking software for small businesses can help you do the following:

• Identify your most profitable clients and projects: Sometimes, you need to cut manpower from somewhere to keep the right clients happy. Time tracking shows which clients pay more per hour and which projects consume more effort than they’re worth. 

That clear picture helps you choose which clients and services to prioritize and retain. 

When satisfied and happy about the extra attention, these customers will also refer other high-quality leads to your business.

• Track and reclaim revenues lost to unproductive hours: Let’s say you pay a full-time remote worker $20 per hour. You’ll lose approximately $15,600 in annual salary to unproductive hours if they are unproductive 3 hours a day on average.

Time loss is a real-world issue that most businesses face today. According to a OnePoll study, over a quarter (26%) of every employee’s work hours are wasted on idle time or avoidable work. Another research from Harvard Business School found that U.S. organizations lose about $100 billion to idle time. 

These issues are caused by inefficient work processes and productivity issues that you can spot and fix with time-tracking data. 

• Recover funds lost to payroll errors: Companies lose $291 on average per payroll error, according to an Ernst & Young (EY) study of U.S. businesses. Apart from the lost funds, resolving these errors unnecessarily increases administrative work hours. A good time-tracking solution eliminates this problem.
  
• Measure time spent per project to review service and product pricing: You can play the numbers game better when you know the specific duration for each job. Insights from employee time-tracking applications empower you to adjust fees and edit contracts to reflect your work realities better before you close any deal.
  
• Strengthen and streamline future project estimates: Time log data ensures you accurately map upcoming projects to actual labor capacity rather than assumptions.
  
• Spot services that should be expanded or discontinued: Some projects and clients are not worth the hassle. While you need to make short-term sacrifices for long-term gains, time-tracking metrics can help you measure each project’s manpower requirements and potential margins, so your final choice is backed by real data.
  
• Keep employees healthy and happy: Every underperforming employee represents a loss to any business. Time tracking can help you prevent burnout among team members, reassign tasks to the right talents, and ensure paychecks are accurate and on time. These efforts can improve employee morale, well-being, and loyalty.
  
  

How to Implement Time Tracking for Revenue Growth

We’ll provide practical steps that you can start implementing today to boost your company’s profits.

Step 1: Identify revenue drivers and define what you want to track

First, you must decide: What exactly do I want time tracking to help me figure out?

Before selecting an employee time-tracking solution, you need to understand where and how you generate revenue, the data points you intend to track, your organization’s current structure, and the results you aim to collect.

That way, you can identify the right time tracker for your business.

Here’s what you should do: 

Break down your services and operations

Break down your core offerings into specific, measurable tasks. Especially the services you offer per client or the activities you run to produce a product. Also, ensure you differentiate billable activities from non-billable operations.

For example, if you are a web design brand, you could list out the following services and projects:

If you’re a small business that sells a product, your billable hours should represent work that goes into developing and maintaining your product, while your overhead costs (like brand marketing) should represent non-billable operations. 

Take a staff head count

How well do you know your employees? The next step is categorizing the people behind those services by their roles, teams, and employment status:

• How many people will be tracked, and their specific roles
• How teams are categorized by project
• Who’s part-time, full-time, and on contract
• Who does billable vs non-billable work

This matters because a two-person team and a 20-person agency may need different tracking structures. It also helps you plan user accounts, permissions, and reporting needs when selecting a tool.

Here’s an example:

You can also create team-specific data that lists each team’s projects, supervisor, clients, and members. This data can help you identify team members who take on too many jobs across different teams. It also helps with decision-making when implementing automated workflows and approvals.

List your clients and projects

Create a simple table detailing each client, what they buy, and what they pay:

Here’s an example:

Identify the metrics you want to track

➡️Which employees do I need to track?

➡️How much do I make from specific services?

➡️What are internal projects taking from billable hours?

➡️How productive is my team?

➡️Is idle time eating into my revenue?

Step 2: Choose the right time-tracking solution for your small business

Now that you’ve identified what to track and what you need, it’s time to assess the best work time trackers for your business. Competent time-tracking software for small businesses has many strengths, but the right choice for your brand should:

✅Handle all your employees without breaking a sweat

✅Scale with your business

✅Produce the type of data you need for decision-making

✅Offer features suited to your business and client structure

The following time trackers can handle teams of any size:

Step 3: Analyze the data, reduce waste, and boost revenue

Now that you’ve selected an employee time tracker, it’s time to extract the data you specified earlier and use your reports to reshape your profit margins. The following tips will help.

Track billable hours separately from non-billable hours

Since you’ve defined what you consider billable and non-billable hours for your business, you can easily use your time tracker to collect these numbers. Separating them lets you see how much of your team’s time generates revenue and how much is absorbed by internal work.

You can also identify which non-billable hours to convert into profitable operations.

Time trackers like Traqq show how many hours each team racks up using specific applications and websites. This method helps you track billable and non-billable hours to the last minute. 

The app’s calendar customizations let you select any desired range and calculate the corresponding hours.

You can also use the project and team-tracking functions in Jibble and Hubstaff to collate billable and non-billable hours.

Track time spent per client and per service

Time-tracking software for small businesses can help you track billable and non-billable hours accrued while executing projects for clients and your company. With these features, you can identify your most profitable clients and services, as well as those that consume the most time.

The method you use to collect this data depends on your time tracking solution. Some applications allow workers to choose projects for easier tracking. For others, supervisors have to filter out projects using reports submitted by team members.

Whatever you do, make sure you can compare hours worked on a project (or service) against your budget or what the client pays.

Once you separate profitable services and clients from the cash-drainers, consider reviewing prices to ensure you achieve the right balance. You can also take measures to reduce labor costs, such as cutting down idle time and making work processes more efficient.

Measure each team’s productivity

Earlier, we calculated how long it takes to complete specific projects. Productivity metrics tell you whether those hours represent the actual input required to execute tasks. 

Time-tracking solutions like Traqq and Jibble are excellent for assessing productivity from multiple angles. For example, Traqq’s Timelines page shows how active an employee or team has been over a specific period. 

Here’s an example:

An SEO agency noticed from its time logs that creating campaign reports takes an average of 6 hours per client, which is far higher than expected. 

After reviewing the workflow, they discovered that staff manually exported data from multiple platforms and built reports from scratch. To plug that leak, they introduced an automated system that pulls analytics into a unified dashboard and generates report templates automatically. 

The job was also reassigned to an employee who’s considered an automation wizard.

That single effort dropped reporting time from 6 hours to 2.5 hours per client and made the service more profitable.

Identify idle time and other time leaks

Idle time is the period employees spend not working because they are waiting for something or someone. It is the difference between total available time and actual working time. Here’s the formula to get specific numbers:

Idle time = Available time – actual working time

Idle time percentage = (Idle time/total available time) x 100

Using a time-tracking application like Traqq is an effective way to spot when idle time occurs and identify its causes, especially in remote work environments. 

Go to the tool’s Reports page and select the Idle Time option to see your team’s wait times. From here, you can trace the root causes. They could be employees waiting for approvals or handoffs, which you can automate to claw back valuable billable hours.

Spot time wasters like avoidable meetings

Unnecessary meetings, long back-and-forth conversations, and repetitive admin work can quietly consume hours that should be spent on productive work. Tracking these moments helps you see how much money you’re losing to unnecessary work. 

Using a time-tracking solution that spots which platform an employee uses at any given time simplifies this process.

For example, you can ensure meetings are flexible and scheduled only when needed. Your team does not need to have roundtables every Wednesday afternoon for simple check-ins on project updates.

Reduce internal overheads

If your internal marketing campaigns, PPC efforts, and other time-consuming activities are not consistently generating leads or boosting conversions, consider cutting them off. You can also outsource specific in-house projects to slash overheads, reduce the burden on employees, and focus on revenue-making tasks.

Case study: How a Web Design Firm Used Time-Tracking Data to Turn an Unprofitable Service Into a Retention Win

A small website design company was doing well on paper. Satisfied clients, consistent revenue intake, and a busy calendar. However, its gross profit margin was dangerously low at 14.29%. 

Here’s how the business found the leak, increased profits, and made its highest-paying client happier.

Business overview

• Team size: 11 employees 
• Services: Web design and UI support, website hosting and maintenance, security updates, content production, landing page creation, and other add-ons
• Clients: 8 active clients

The problem

After taking inventory of its services, clients, work hours, and balance sheet, the audit revealed the following:

💰Monthly total revenue from 8 clients: $84,000

💰Monthly operational costs (without employee work hours): $18,000

💰Budgeted monthly employee work hours (billable and non-billable): 1,600 ($36,000 – $40,000)

💰Realized profit: $12,000

The diagnosis

Here’s what time tracking revealed:

A detailed per-service cost analysis using time tracking showed the following reasons for the small margin: 

• Most services turned in reasonable profits
• The firm overran its total work hours by more than 50%
• One service offered to the firm’s biggest client was running at a significant loss
• Another service from the same profitable client increased billable hours significantly

Here’s the breakdown of the client’s services:

The table shows Service C in severe loss, while Service B only returns a 5% profit.

Raising the prices of Services B and C wasn’t an option, as this was the company’s biggest client, and any sign of price pressure could risk the entire account. The firm was also charging at market price.

Time-tracking insights showed:

• Too many manual updates
• Lots of wait times
• Bloated internal marketing and content campaigns
• Repeated fixes caused by unclear client requests
• Developers spending hours locating old assets
• Maintenance tasks scattered across multiple people (context switching)
• No automation for routine checks
• Inefficient time tracking

The Solution

Using workflow and productivity data, the firm improved efficiency rather than raising prices.

How the firm dealt with idle time and its non-billable hours shortfall:

• Automated its repetitive admin tasks, such as routine approvals and work handoffs
• Hired an agency for its PPC campaign (reduced 100 hours)
• Advised team members to use the smart time-tracking function in its time tracker that automatically turns off the tracker when they switch to non-work-related tasks (cleared more than 80 hours)
• Stuck to shorter meetings and replaced some meetings with team broadcasts, emails, and surveys

They redesigned the workflow for Service A:

• Introduced automated website health checks (cut weekly manual reviews from 3 hours to 45 minutes)
• Centralized client assets in one shared folder
• Created structured maintenance request forms
• Moved maintenance tasks to the developer best suited for fast turnarounds
• Batched updates instead of doing them ad hoc

The result

• Over 650 hours of billable and non-billable hours were reclaimed
• Employees worked shorter hours, which fixed the firm’s burnout problem
• The firm turned Service C into a profitable offering (25% margin)
• Due to the reallocated manpower from Service C, Service A became almost 60% profitable, Service B saw a 30% increase in its profit margins, and 
• The firm offered its biggest client a loyalty discount of 5% across all its services and still remained profitable
• Overall labor cost fell to $38,000, and profits grew to $27,700, more than double the previous number.

Turn Your Team’s Work Hours Into Real Profit

A competent time tracker plays a vital role in helping you spot profitability shortfalls because it shows where your employees’ work hours go. It enables you to discover which services are worth keeping, what to prioritize, and areas where improvement is critical.

Ensure you invest in a solution that meets your organization’s needs, can track the data points needed for revenue-making decisions, and can scale with your business.

FAQs

By Samuel Mbanaso