What Is Time Tracking? A Complete Guide to the Benefits, Methods & Implementation

Each day consists of 86,400 seconds or 1,440 minutes. That sounds like a lot of time, but once we remove sleep from the equation, much of that time goes by in a flash.

To improve our time management, we must first understand how we spend our time and then make changes to optimize our actions — like a doctor diagnosing an ailment before prescribing treatment.

Since you’re not (likely) a doctor, we’ll help you get started with this quick guide, which explains what time tracking involves, how easy it is, and the benefits you can expect once you fess up about how you spend each hour of the day.

TL;DR—Key Takeaways

• Time tracking is exactly what it sounds like — recording and analyzing how you spend time on different tasks and activities.
• It has many benefits, such as more accurate invoicing, a better understanding of project costs, the ability to create timesheets, improved project management, and others.
• There are multiple ways to track time, such as manual, digital, and automated, as well as productivity techniques such as Pomodoro and time blocking.
• Great time tracking software should have a great user experience, lots of integrations, customization options, detailed reporting, and data security, among other features.
• To get your team excited about time tracking, explain why it’s important, show them the ropes, and lead by example to demonstrate your own commitment to optimizing time.

What is time tracking?

Time tracking is the process of recording and analyzing how you spend time on different tasks and activities. You can record these details individually or as part of a team. And it’s also suitable for analyzing what’s happening in both your personal and work hours.

For example, on Monday, you might spend 35 minutes eating lunch, 4 hours 15 minutes in meetings, 1 hour 15 minutes at the gym, 2 hours 10 minutes commuting to work, etc. Once you’ve tracked these insights, you’ll see the big picture of where every minute goes. Beware—there might be some shockers in there!

What are the benefits of time tracking?

When we commit to time tracking, the main benefit is increased productivity. Being presented with how we spend our time in black and white makes it impossible to ignore the minutes we waste on unproductive activities.

When we harness our personal time better, we can spend more quality time with our friends and families, doing things we love and care about. Sounds like a win to us.

In a professional context, you’ll also enjoy some of the following benefits of time tracking:

📄 Producing more accurate client invoices

Accurate time tracking is critical if you charge your clients by the hour. A minute here or there daily can stack up to thousands of dollars of damage every year.

In some cases, you might overcharge your clients and face their questions or lose them to a business rival. But equally, it’s just as easy to shoot yourself in the foot and forget to charge for all of the work time you’ve spent on a particular client.

Time tracking also helps when differentiating between billable hours and non-billable hours. This highlights the amount of time your employees spend on tasks that don’t improve your bottom line. The promise? Commit to time tracking, and you’ll enjoy better invoicing and increased revenue.

💰 Understanding project costs better

When you track time for projects, you’ll start to understand how long it takes to complete portions of the project and the final product. Most importantly, you’ll know how long you require to produce quality work without feeling rushed or burned out.

For example, a good developer can build a website in one month. If a new client approaches them and asks to build a website in ten days, the designer knows it’s not feasible.

The result is a better estimation of project costs. They’ll become better at resource allocation, budgeting, and predicting timelines for future projects.

Let’s say a prospective customer asks the developer to build that website for $5,000. Based on time tracking entries, they can determine if this means $20 or $80 per hour and whether the fee is worth their time.

⌛ Creating simple timesheets for hourly workers

HR teams use employee timesheets for non-salaried workers to determine:

• Who worked
• How long they worked for
• How much to pay them
• How much time off they’ve accumulated

While an important part of the working arrangement for hourly workers, time reports can be extremely tedious for the employees filling them in and the admin teams processing them. Ideally, you’ll use time tracking tools to manage time entries automatically. This ensures:

• Each employee gets accurate and fair compensation
• No one has to spend hours digging through spreadsheets in Excel and calculating time entries
• Payroll is automated, and legal compliance becomes a breeze

👷 Streamlining project management

When you determine where your team’s time is spent, project management takes on a completely new level.

Employee time tracking shows you:

• The total time spent working on a project
• How much time each task requires
• Who spends their time on which task (and how much)

As a result, you can spot obstacles and inefficiencies without micromanagement. For example, you can determine that a particular client is taking double the time for task completion while paying the same as everyone else. Or you’ll become aware that certain employees purposely take longer to complete a task.

Ultimately, project time tracking gives you full visibility of your team’s activities, and you’re less likely to take on too much or work too little to be profitable.

🔓 Building trust and transparency

Imagine you have to charge a client $50,000 to build a mobile app. The client has just started working with you, and they don’t know much about app development.

The best way to convince them the work is worth the investment? Detailed timesheets.

Time tracking creates a bond of trust and transparency between a business and its clients. For each item on the invoice, you can add a line describing how much time it took, the hourly rate, and even who completed the work.

Popular time tracking methods

There’s more than one way to crack an egg, and the same is true of how you choose to track time. Here are some methods you can choose to slide into your workflows:

Manual time tracking

As the name suggests, you manually track the time to complete a task. You write down when you started and finished and then add the numbers at the end of the day, week, or month.

The biggest benefit of the manual method is that it’s easy and free. However, it’s very time-consuming, and you can quickly get tired of navigating spreadsheets and staring at the clock nonstop.

Swipe cards

Swipe-card time systems track employees’ time at physical locations and monitor attendance, absences, and breaks. They’re 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.

Digital time tracking

Time tracking apps such as Toggl Track allow you to hit a button to start a timer and once more when the work is done. Besides saving time, you also get integrations with other tools (e.g., project management software), automated timesheets and invoices, and much more.

This method allows you or your team members to track time on mobile devices, too, making it ideal for a team that is on the go.

Automated time tracking

Keeping an accurate record of all activities in one place is easy when everything is automated. An app can simply analyze the window or app you’re using and break down your time entries.

For example, it can tell you how long you spent in Google Docs, Figma, Docker, or some other app. This method is ideal as it doesn’t add new bottlenecks to your workdays; instead, it breaks down activities neatly without manual work.

Mobile time tracking

If you have a distributed workforce across various locations, they can log their time using their mobile devices. With the right time tracking software, they can start the timer on their mobile and stop it on a desktop device.

Geofencing

As an alternative to mobile tracking, geofencing is another way to automatically track the time when an employee enters or leaves a specific location. Administrators set up virtual boundaries, and when employees enter or exit these boundaries, an app automatically tracks their time.

This method can be useful for businesses with field workers or remote employees who may not have access to a computer. However, it can feel too much like surveillance for some.

Pomodoro time tracking

In this time tracking system, you do focused bursts of productive work (usually 25 minutes) followed by a break (usually 5 minutes).

Pomodoro forces you to work without distractions and take breaks to get rest and prepare for another Pomodoro cycle. It’s also one of the templates offered in many time tracking platforms.

Time blocking

In this method, you block off a time period to work on a specific task or set of tasks without interruptions. For example, you might allocate a one-hour block to write or respond to emails. It’s ideal for those with busy schedules who work on tasks they can easily group.

How to use time tracking in different industries

Anyone can use time tracking tools, from small businesses and remote teams to Fortune 500 companies. However, different types of users will experience different benefits:

Freelancers

Freelancers can use time tracking to bill clients more accurately and get fair payment for the work they deliver. They can easily distinguish non-billable and billable time and only invoice clients for the work on their projects.

Perhaps most importantly, freelancers can use time tracking entries to establish trust and transparency with clients.

Lawyers

Lawyers rely on time tracking to bill clients by the hour, often commanding a hefty fee. Tracking their work hours on cases or in court helps them maintain transparency and justify their costs.

They can also determine which clients are taking more time than the others and what tasks take up most of their days.

Contractors

Contractors typically juggle multiple clients at a time which requires strong self-discipline and careful time management.

Using time tracking platforms, contractors can accurately track projects and tasks per client. They can create accurate time logs and invoices, monitor progress, and identify bottlenecks in each project.

Service providers

Service providers like IT support can use time tracking to improve their project management and determine which tasks and projects take up a huge chunk of their time. Based on their time analysis, they can better allocate their resources, prioritize tasks and projects, and improve their productivity.

Creative agencies

Creative agencies can use time tracking to monitor their employees and clients. On the one hand, they get time cards with each employee’s records for the day and month, ensuring everyone earns their salary.

On the other hand, agencies can more accurately predict project pricing and scope. For example, they can easily avoid scope creep and charging too little for a project that could take double the estimated time.

Large teams

The famous Pareto principle states that 20% of the input is responsible for 80% of the results. But in large teams, it can be easy to lose track of who does what (and when).

Time tracking in large teams lets you determine responsible stakeholders and their total contribution to the finished project. Additionally, large teams can save massive amounts of time with automated timesheets, invoices, and payroll.

Essential features of great time tracking software

The features you need will depend on your goals and needs. However, any great time tracking software should have the following:

• User-friendly interface: The app should be easy to navigate so employees can adopt it quickly without a steep learning curve.
• Integration capabilities: Integrations with tools such as project management platforms, invoicing apps, and payroll software save time for your team. Instead of switching back and forth between apps, you can do everything in one window.
• Real-time tracking: You’ll gain a bird’s eye view of your team and their performance, enabling quick decision-making and prioritization.
• Detailed reporting: You should be able to generate detailed and insightful reports for each task, project, and employee. These reports are valuable for your clients and your team, as you can pinpoint obstacles, improve productivity, and track project progress.
• Customization options: Each team has its own processes, workflows, and stakeholders. Your time tracking solution should adapt to your unique needs and preferences.
• Data security: The data in the time tracking platform should be yours and yours only. This protects your business, employees, and clients from unauthorized access.

3 common time tracking mistakes

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

1. Confusing time tracking with employee monitoring

Time tracking and employee monitoring can often be mistaken for the same practice, but they serve entirely different purposes. 

Managers can use time tracking to understand work patterns, optimize processes, and improve productivity. In contrast, employee monitoring involves recording employees’ activities to ensure they work as expected. Compared to time tracking, employee monitoring is incredibly invasive, often using tracked keystrokes and screen activity as “proof” of what workers are doing.

2. Not tracking billable and non-billable hours

Often, employees only track billable project hours they can charge their clients for. They forget about all those extra hours 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. Proper tracking can also help you adjust your rates.

For example, if a client project requires 25 hours spent strategizing internally but 10 hours executing the work, it would be a mistake to only charge for the 10 hours. You might need to change your rate structure or negotiate with your client to reach a fairer deal.

3. 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. 

How to get employees excited about implementing a time tracking app

As a business owner, time tracking obviously has immense value for you. But how do you explain it to Jane from accounting, who already has a packed calendar and 15 different apps she uses daily? Here are some tips.

1. Explain why time tracking is important

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

In other words, show employees that time tracking benefits everyone, from the team to the clients. Reiterate you’re not using it to micromanage or spy on your team.

2. Show your team how to track their time

Before they start using a time tracking app, show your team how it’s done. Tools such as Toggl Track are super simple, but you should still show the team how you want them to use the app.

Training your team on how to track their time:

• Ensures accuracy and consistency
• Reduces the resistance to change
• Optimizes tool usage

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

3. Lead by example

Show your team that no one is exempt from time tracking, even the managers and the CEO. Otherwise, if only the employees are tracking time, they might get a feeling that management is protected and time tracking entries will be used against them.

Fire up the automated time tracker as you begin work, and let the app do the rest of its magic. It will benefit you (no matter your role or skill level) and show your team you’re all equal.

How Toggl Track can help you track time

Once you have your time tracking data collected accurately, you can use it in many different ways. We’ll explore each in more detail. 

1. Track project profitability

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. 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:

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

To create task-based estimates:

1. Open the Project
2. Select the Tasks tab
3. Add or edit an estimate from the Estimate column 

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

3. Improve resource allocation and utilization

Resource allocation is 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 keep projects on track and within budget by improving productivity, efficiency, and waste minimization. 

4. Monitor employee workload

Monitoring employee workload prevents burnout, keeps workloads balanced, and promotes a healthy work environment. 

With Toggl Track, you can easily view your team’s tracked time and what they’re working 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 require all businesses to implement time tracking systems to record employee hours (as of July 1st, 2024.)

Through its Export functionality, 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:

• 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. 

Get started with a free time tracker

Time tracking isn’t just a way to keep tabs on employees scrolling TikTok instead of putting hours in Jira. It’s a tool that improves productivity and profitability and benefits everyone in the workplace.

Even for individuals, time tracking can help you become more aware of your day-to-day obligations and become a better version of yourself.

The best part is that time tracking is easy and free. With Toggl Track, you can gain control of where and how you spend your time.

Try it out now by signing up for a free Toggl Track account!

📚 Read more about the best time tracking tools:

• 10 Best Free Timesheet Apps To Track Work Hours (2025)
• 10 Best Time Tracking Apps & Billing Software for Consultants [2024]
• 10 Best Agency Time Tracking Software for 2024 [Comparison]