How to track billable hours for an agency

To track billable hours for an agency, give every client a code and every job a line under it, have each person log time daily against the job, and compare each retainer's hours with its allowance weekly. The logging is the easy part. The agency-specific risk is a retainer that overruns unnoticed.

Which agency hours are billable?

Agency hours are billable when the client's contract says so, which means the same hour can be chargeable on one client and free on another. This table is a sensible default. Check it against each contract.

Log everything, including what you can't charge. The general rules are in the guide to billable and non-billable hours, and time you logged but won't bill is a write-down with a reason beside it.

How should an agency set up clients, jobs and tasks?

An agency's time codes should go client, then job, then task type, with a short list of task types everyone shares. In this invented setup, HARB-RET is Harbour Foods' monthly retainer and HARB-WEB is a separate website job for the same client, because the two have different terms.

• Task types: keep them to what you'd report on, such as strategy, copy, design, production and account management. A list of thirty gets ignored, and everything ends up in "general".
• Internal codes: INT-PITCH and INT-ADMIN take everything that isn't client work, so each person's week adds up to their contract hours. A week that falls short means missing time.
• Rates: keep them against the role, not the entry. If a client wants one rate across the team, work out a blended hourly rate and leave the role rates in your own sheet.

A shared weekly team timesheet is enough to run this until the agency has more clients than one person can keep in their head.

How do you track retainer hours without overrunning?

Track retainer hours by comparing the hours used with the share of the month gone, every week. Here's an invented example: a €6,000 monthly retainer buys 60 hours, which is a blended €100 an hour. After two weeks of four, 38 hours have gone. That's 63% of the allowance at the halfway point.

Tell the client now, while the choice is still theirs:

We've used 38 of the 60 hours in this month's retainer, with two weeks left. At this pace the month would finish at around 76 hours. Tell us which of the remaining items to hold, or we can carry on and bill the extra 16 hours at the agreed €100 an hour.

At the end of the month, measure the overrun both ways, because they don't agree.

Measured in hours, the month is 6.5 hours over, which at €100 is an extra €650. Measured in value at rate-card rates, it's only €135 over the €6,000 fee, because the month's mix of roles averaged about €92 an hour, below the €100 the retainer assumes. Both are honest sums, and the gap between them is €515.

So the contract has to say which unit the retainer is measured in. Settle that, and what happens to unused hours, before anyone starts work. The guide to invoicing a monthly retainer covers the invoice itself.

How do you get a creative team to log time?

Get a creative team to log time by making it take under a minute a day and by showing them what the figures are for. Nobody fills in a timesheet well because they were told to.

• Log at the end of each day, with the calendar open. Don't ask people to run timers while they concentrate.
• Show each person the retainer's burn. Someone who can see that a client is at 63% by mid-month will mention it before you have to ask.
• Don't use the log to judge how fast people are. Once it's a performance measure, entries drift towards what looks good, and the invoices drift with them.

If you want it written down, a short timesheet policy sets the deadline and who follows up.

What should an agency review each month?

An agency's monthly review should turn four figures into four decisions.

Tracking agency hours in ERPFlow

ERPFlow doesn't have a timer or timesheets today. Time tracking, including converting tracked time into invoices, is coming soon. ERPFlow also has no per-person time reports, and nothing tracks a retainer's allowance, so the logging and the burn check above stay in your spreadsheet.

Here's what it does for a marketing or creative agency:

• Clients and jobs: a project is a board you can link to a customer. Cards carry assignees, deadlines, files and comments, plus time spent typed in as hours and minutes, and those times add up per project and per customer. Each card holds one figure, with no date and no split by person, and it doesn't become invoice lines.
• Retainer fees: a recurring invoice bills a set amount every week, month, three months or year, and either emails it or leaves it as a draft. It issues the invoice and doesn't collect the money. If you bill overruns, choose Create drafts so you can add the extra line before you issue, or raise a separate invoice.
• Rates: one service per role, with the unit set to hours and the hourly price, so any line can be picked rather than typed.