What Is Time Tracking: An Actionable Guide To Boost Productivity

Ever wondered where all those employee hours go?

Keeping tabs on every task your team tackles and the time it spends doing them can feel like herding cats.

That’s where time tracking comes in.

Imagine having a clear snapshot of who’s working on what, how long it takes, and where improvements can be made. Without it, you’re left guessing—and losing money.

But with time tracking in place, you can boost productivity, streamline invoicing, and make data-driven decisions.

Let’s dive into what time tracking really is and how it can transform your agency’s workflow. You’ll learn:

What time tracking is and what its benefits are
Time tracking methods and process
Getting meaningful insights from the tracked time data

What is time tracking?

Time tracking is the process of recording the amount of time spent on specific tasks or activities.

It helps you see exactly where your time goes.

Keeping track of work hours can improve time management, project scheduling, and team workloads. Time tracking also helps increase profitability with accurate billing and improved team productivity.

At a personal level, tracking your time can help you work smarter, set better priorities, and make the most of every day.

Whether it’s for your business or your own tasks, time tracking helps you stay on top of things and get more done.

Time tracking in the workplace is an important and valuable practice in many industries and job roles, including:

Team managers: Team managers use time tracking to analyze team performance and productivity and manage workloads. It helps them keep projects and schedules on track.
Project managers: Project managers rely on time tracking to allocate resources efficiently throughout a project and meet deadlines. Accurately tracked work hours help them estimate tasks and projects and calculate project budgets.
Freelancers: Freelancers use time tracking to bill clients accurately, maintain transparency, and manage their schedules.
Contractors: Contractors use time tracking for similar reasons, like accurate billing and efficient time management.
Service providers: IT support or marketing agencies track time to quantify the effort spent on each client or task and to optimize their service delivery.
Lawyers: Lawyers rely on time tracking to bill clients by the hour. Tracking their work hours on cases or in court helps them maintain transparency and justify their costs.

Further Reading:

How Do Lawyers Track Billable Hours? (5 Ways Compared)

Here are three elements of time tracking that you’re likely to hear about often:

Time entry: A time entry records task durations, breaks, and overtime.
Timesheet approval: Timesheet approval is when managers or supervisors review and approve employees’ tracked time.
Reporting: Reporting involves analyzing tracked time data to generate insights. Reports can highlight trends in productivity, project progress, and labor costs.

What are the benefits of time tracking?

Time tracking helps freelancers, teams, and businesses in many ways.

Time tracking offers many benefits, from more productive and better-performing teams to more accurate invoices and better profitability insights.

Here are some of them:

Improved productivity: Time tracking can increase focus and reduce distractions, making employees more productive and efficient.
More accurate project planning: By analyzing accurate records from past projects, managers can make more accurate estimates for tasks and projects. This helps them plan better and allocate resources efficiently.
Better financial oversight: Tracking time allows you to have a clearer understanding of project costs, which allows you to handle budgets more effectively.
Client transparency and proof of work: Detailed breakdowns of how you spend time on different projects and tasks build client trust and transparency.

Want to discover more benefits of tracking your team’s time? Check out this article.

Time tracking methods

Teams use different methods of tracking their time based on their needs and workflows. Here are four common time tracking methods:

Paper: Traditional paper-based tracking involves manually logging hours in a notebook or on printed employee timesheets. You may use a phone or stopwatch to track work hours and then write them down on paper. This method is inexpensive and simple to use anytime.
However, paper timekeeping can be time-consuming, prone to errors, and ineffective.
Spreadsheet: Using spreadsheets for time tracking, like Excel or Google Sheets, is a step up from paper. You can create custom templates to enter your hours and use basic formulas to automate calculations.
While spreadsheets are more organized and less prone to errors and physical damage than paper, they still rely heavily on manual entry. Spreadsheet time tracking can become complicated to manage as data grows.
Swipe cards: Swipe-card time systems track employees’ time at physical locations and monitor attendance, absences, and breaks. They are easy for the whole team to use and don’t require training.
Although more modern than punch card systems, this type of time clock still has some limitations. One is that it can’t be used to track remote employee time.
Time tracking software: The digital time tracking method offers the most features and is efficient. Time tracking software can automatically record the amount of time spent on tasks and projects, generate detailed time reports, and integrate with project management software or billing systems.
Digital time tracking solutions work for both on-site and remote teams. The cons of such systems could be that some are complicated or too expensive.

Further Reading:

9 Best Employee Time Tracking Software for 2024: Tried & Tested

How to use time tracking data to boost business efficiency

Once you have your time tracking data collected accurately, you can use it in many different ways.

We’ll explore each one in more detail.

1. Track project profitability

Project profitability is a metric that measures the financial gain generated by a project.

Tracking project profitability helps project managers identify which projects bring in money and which do not. With these insights, they can plan future projects better to increase business profitability.

With Toggl Track, project profitability is easy to measure. Use the Insights feature to analyze your team’s and projects’ financial performance.

Toggl Track Insights feature showing project profitability data.

Explore project earnings, labor costs, and employee and project profits.

2. Identify bottlenecks

A bottleneck in project management is a point in a process where work slows down or gets stuck.

Identifying bottleneck tasks in a project helps managers address inefficiencies and streamline workflows.

To identify bottlenecks with Toggl Track, start by estimating tasks.

To set project time estimates:

Click Create New Project or Edit Project
Go to the Time Estimate section
Enter your custom hourly estimate

Adding a time estimate to project in Toggl Track.

To create task-based estimates:

Open the Project
Select the Tasks tab
Add or edit an estimate from the Estimate column

Adding a task time estimate in Toggl Track.

After you’ve created your estimates, go to the Project Dashboard to compare estimates vs. actual time tracked and identify potential bottleneck tasks.

Comparing actual time vs time estimate on the Project Dashboard.

3. Improve resource allocation and utilization

Resource allocation is the process of finding and assigning available resources to a project.

Resource utilization refers to how effectively these resources are used for maximum productivity.

Good resource allocation and utilization help keep projects on track and within budget by improving productivity, efficiency, and waste minimization.

You can use Toggl Plan’s Team Timeline to allocate resources more efficiently. You’ll get a visual overview of who’s working on what and when to make informed resource allocation decisions.

Toggl Track integrates seamlessly with Toggl Plan, so you can start the timer directly from Plan. Just right-click on any task and select Start time tracking.

Toggl Track integrating with Toggl Plan to start task timers from Toggl Plan.

4. Monitor employee workload

Monitoring employee workload helps to prevent burnout, keep workloads balanced, and promote a healthy work environment.

With Toggl Track, you can easily view your team’s tracked time and what they work on. Go to the Team Activity tab under Organization > Workspace > Select Workspace> Activity tab.

Here, you can see the most active team members from the past seven workdays and use the dropdown filter to review Activity by User or the last 20 time entries.

5. Identify training needs

Identifying inefficient team members is important.

Why?

It helps you understand who needs training to perform better and who needs better tools.

Toggl Track’s Detailed Report makes it easy to analyze individual time entries and spot ineffective work.

You can access this report by clicking the Reports tab on the left side menu and selecting Detailed from the top center of the screen.

6. Compliance with local laws

Depending on where you base your business, you may need to comply with local labor laws regarding time tracking and employee work hours.

For example, new regulations in the EU will require all businesses to implement time tracking systems to record employee hours from July 1st, 2024.

Through its Export feature, Toggl Track makes it easy to provide a detailed breakdown of time tracked when needed.

You can choose to export time entries or user data with total hours worked and overtime to easily share during audits or regulatory reviews.

7. Cultivate self-accountability

Project managers can use time tracking data to cultivate self-accountability among team members. Here are some tips for how to do it:

Share time tracking insights with employees so they can see their work habits and areas for improvement.
Suggest employees set personal benchmarks based on their time tracking data to keep them accountable and focused on their goals.
Recognize and reward employees who improve their time management to motivate them to take time tracking seriously.

How to get employees to track time

To gain meaningful time tracking insights, you must ensure the team tracks time accurately and consistently.

Here is how to make the process straightforward and easier to adopt by the whole team:

1. Explain why time tracking is important

Showing your employees why time tracking is important, and its benefits for the business can speed up team adoption.

Highlight how accurate time tracking contributes to better project estimates and billing and improves employee productivity and accountability.

It’s important to clarify that you’re not looking to monitor or surveil the team but to empower them to work at their best.

2. Show your team how to track their time

Training your team on how to track their time is important for various reasons:

It ensures accuracy and consistency
It reduces the resistance to change
It optimizes tool usage

Whether it’s a simple spreadsheet or dedicated software, employees need to see practical steps and tips on logging time to demystify the process.

3. Lead by example – track time yourself

Leading by example and tracking your time diligently can also speed up team adoption and improve the time tracking experience.

Why?

When team members see leaders committing to the same practices they advocate, it reinforces the value of time tracking and can encourage team compliance.

You might also want to share your insights on how you’ve improved your own productivity using time tracking data to inspire your team.

Further Reading:

How To Get Employees To Track Time: 7 Motivation Techniques

Common time tracking mistakes

Time tracking is a powerful tool for managing work and productivity, but it can be less effective when these mistakes are being made:

Confusing time tracking with employee monitoring: Time tracking and employee monitoring can often be mistaken for the same practice, but they serve different purposes.
Through time tracking, managers look to understand work patterns, optimize processes, and improve productivity.
Employee monitoring involves recording employees’ activities to ensure they work as expected. Unlike time tracking, employee monitoring can be invasive as it often tracks keystrokes and screen activity.
Toggl is firmly against employee monitoring as it promotes a culture of surveillance rather than trust.
If you’re looking for non-invasive time tracking tools, here are 7 Best Employee Monitoring Software (That Aren’t Creepy).
Not tracking billable and non-billable hours: Often, employees only track billable project hours and forget about the time spent on non-billable tasks like internal meetings or administrative work.
This is a mistake, as tracking non-billable hours can help you spot inefficient work processes and understand overall productivity.
Using time tracking data for appraisals: Although time tracking data shows how team members spend their work time, it doesn’t capture the full picture of an employee’s contributions.
Analyzing work performance based only on time tracking data is unfair as it overlooks the quality of work, creativity, or problem-solving skills.

Choosing the best time tracking software

Choosing the right time tracking software should be about your specific needs, but we have some general advice.

The best time tracking tools are powerful but easy to use, integrate with many other apps, and have detailed time reporting features.

Popular use cases of time tracking software are the following:

Employee time tracking
Billing and invoicing
Payroll
Time reporting
Project time tracking

Some key features to consider when using a time tracker are an intuitive interface, detailed reporting, mobile app tracking, and profitability insights.

The price of using time tracking software can range from $5 to $50 per user per month.

Software	Key features	Use cases	Pricing
Toggl Track	User-friendly interface One-click timer Multi-platform billable and non-billable time tracking Detailed Time Reports Fully customizable reports 100+ integrations with project management tools	Employee time tracking Billable time tracking Time reportingInvoicing Payroll	Starting from $10 per user per month
Clockify	Automatic time tracking Invoicing Time kiosks Productivity tracking GPS tracking Screenshots	Remote time tracking Employee monitoring Time off management Invoicing functionality	Starting from $4.99 per user per month
Harvest	Time reporting Time tracking on mobile devices Invoice management Online client payments	Time billing Reporting and analysisInvoicing Payments	Starting from $12 per user per month