Calculate your costs based on the value of your time

Time is money

Time is money; that we already know. It can be quite easily quantified: the cost of human time at work can be calculated as the ratio between the total monthly cost of an employee (wage, internet, phone) and average monthly number of working hours (168 if you count 8 hours per day and 21 workdays per month).

There is however a „problem“: human aren´t machines, their performance can´t be divided into standardized man-hours. We are the furthest thing from dull manufacturing capacities, processing one task after another. We are influenced by the working environment, weather, time of day, hormones and thousands of other things. As a result we´re fairly unproductive one day and discover gravity or painting Mona Lisa the other.

However, the fact that you can´t consistently predict the cost of your time, doesn´t mean you shouldn´t track or work with it at all. You should just look at the bigger picture and evaluate the time in the long-term. It helps to implement the concept of time tracking in individual departments, as you have a more personal approach to them and the numbers mean more to you as they can give you feedback. This is helpful if you’re a bigger company as dividing it into departments helps you be more organized. So how? Let’s take a look at how you can, in primaERP.

People are No 1

So what is the most important part of the department? Yup, people. This is the reason why you should consider that the software you want to use is suited for teams. primaERP does exactly this. So go ahead, create your account and invite your team. 

The price of the hour

As people’s time is valuable and indispensable, you should assume it as a variable in the costs and expenses and therefore assign a price to their work/time. You can do this by using the billing module of primaERP, which you can access by the top left button. This is sensitive information, but don’t worry, only you, the manager, can see the prices, as your employees/colleagues only have the basic access level (Roles in primaERP).

What do you work on and for whom?

Ask your employees to write down what their most time consuming assignments are and then answer the same question yourself. Merge both lists into one but it should contain no more than 15-20 items. Less is ok, if it is more, try combining them.

Go through the list and ask, FOR WHOM you/they are doing each task- this is your customer. It can be a real client of your company or it can be someone from the company, like the CEO, an internal department or some project manager. The key should be, that your work benefits him and it is or it should be his cost. In the end, almost all of your departments´ work should be assigned to clients but of course some routine activities, such as e-mail or printing can remain unassigned. Create one client for those as well, so you can easily track how much time you spend with this kind of work. You can also use the note field in the time records to describe, what you were really doing, which will improve the details of your data.

Now that you know your clients, you can create these in the Manage section of primaERP and also assign them a code, which will help you search quickly for a client in the future.

As you can see in the image above, I filled in for whom I do my work as clients in primaERP, like the CEO, development department, etc and for the routine work, I created a “client” called Internal. 

Set up your Projects

So now go back to the list of tasks and group them together by the goal they achieve. This common goal can then be the name of the project and the specific things you do can be the tasks for the project. This is an example of how I set it up in primaERP:

Where did your time go?

After some time, you probably want to take a look at all this information and analyze it, but how? At this point, it is very crucial to have tools, which automatize and simplify this process, as it can be quite overwhelming. primaERP, for example, has a series of reports which focus on the most common aspects of any organization:

In the Projects report, you can see the amount of time you´ve invested in a selected period. If you added the hourly cost to your employees, you will see the cost of your project for that period. By using the filter, you can choose what information you want to see. For example, you can choose to compare the total time of the projects and see if it turned out as planned and if it was efficient. You can also click the name of the project to see more details. 

Who worked on what?

In the Team report, you can see how much your team worked and if somebody forgot to track their time. And, as in the projects, you can always click on the name to get a more detailed view. Another option to see the process of your team is in the team overview, where you can also easily edit and adjust the time of your team. 

All data in one place

No matter what question you have about the time tracked, you can find the answer in the Complete report. You should especially check the „client“, to whom you assigned the unproductive time and read the descriptions to see what was actually done. You will then see, how much time (and money) this routine work cost you and be able to improve the automation of your routines.

Summary

1) Make the decision to track the time in your departments, select a tool like primaERP and invite the colleagues to join the team.

2) Assign a price per hour to your team members.

3) Write down the list of the department´s duties and who they are done for, in order to create your clients and projects.

4) Start tracking your time.

5) After one month (at the latest), look at the data and analyze the results.  

Closure

You now found a way to look at the cost of your and your employees/colleagues’ time. Once you have analyzed your data and have found the perfect option for you, you can play around with setting up the way you get your data. In this article, you’ve seen how you can use primaERP to see those costs and look at the numbers. So now, making the right decision, well, that’s still up to you. :-)