Time is Inventory

Time is Inventory.

Here’s something to help the Engineer understand the importance of Time:

“Let’s say we sold computers.  Every day I buy 8 computers and stick them in the corner.  At the end of the day if we only sell 3 of them, I take the other 5 and throw them in the dumpster and start again tomorrow.  How long do you think I would stay in business if I worked my inventory that way?”

(The Engineer ALWAYS agrees that we would go out of business.)

So then I say, “So would you feel secure working for a company that throws away their inventory at the end of the day?”

(The Engineer ALWAYS says “No”)

So then I say, “So you mean I should have a system for keeping track of my inventory?”

(The Engineer ALWAYS says “Yes”)

“Wouldn’t it be better if we had a system to know where our inventory goes and who we sold the computers to so we can make sure they all get invoiced so we don’t lose computers?”

(The Engineer ALWAYS says “Yes”)

“So what would you say if I told you that I buy 8 hours from you every day and if I don’t invoice any clients for those hours, I just throw them in the dumpster at the end of the day?  We are in the Service Business and what we sell is “Hours”.  If I don’t sell them by the end of the day, I throw them away.  Time is an inventory item with NO SHELF LIFE. 

With Computers, if I don’t sell them today, I still have them to sell tomorrow, not so with “Time”.  Your job is to sell your time.  Don’t you think we should have a “System” to keep track of your inventory/time?  We do, it’s called a timesheet.  Now, either keep track of your inventory, or I will find an engineer that does.  This is NOT negotiable, Period.” DiscussionEverything revolves around the Time Entry.

1.       It’s how we communicate with our client.  The only thing that really matters is the PERCEPTION of the client on how well we help them.  The sooner we reinforce the work that we did the better the perception of the client will be.  Even if we fix it now and document it later, their perception will be that we “fixed it later”.

2.       The other engineers on the team rely on current information.  Clients rightfully expect our left hand to know what our right hand is doing.  There is really only one way for that to happen.  Real time entry of notes.

3.       Symbol of Quality on Managed Services.  I believe it is important to invoice and send all of the notes as a reminder that we are doing valuable work for the client.

4.       Time & Materials billing.  One thing I’ve learned is that the value of service diminishes over time.  A client will authorize After Hours Rates while they are down, but  if you wait too long to send the invoice, they won’t “feel” like they should pay the overage rates.  Same hold true with project overages.

5.       Agreement Billing – When using Retainers or Block Time agreements, Low Balance Notifications are commonly used to notify the sales person that they need to contact the client to sell them more hours.  When the engineer “Hoards” the hours and does all of the time entry late, the notification inevitably comes too late for the sales person to warn the client OR get control of the amount of hours being spent on a particular problem.

6.       Fixed Fee Agreement Profitability – “Utilization” may be King on Time and Materials billing, but “Efficiency” is King on Fixed Fee agreements.    The ONLY way to measure fixed fee profitability is with Accurate time entry against the agreements.

7.       Ticket Closing Procedures.  I recommend that Engineers do NOT close tickets.  They should Complete them.  Then, a separate person should review time entry and all other ticket details before closing the ticket.  When the engineer “Hoards” time entry (completing tickets), it creates “bulges” in the amount of tickets that need to flow through to invoicing and makes it more difficult for the admin staff to manage their work load.

8.       Time Approval Procedures – late time entry usually means late timesheets.  Unless you are comfortable billing unapproved time, this leads to slow invoicing and decreasing cash flow for the company.

9.       Invoicing Procedures – Month end invoicing can’t happen until all the time is entered for the month, which slows down financial reporting.

10.   Invoice Credits – two thoughts on credits.  When invoices are slow to arrive to clients, they are more likely to contest the billing amounts (The value of service diminishes over time).  The second one is when defending against a credit, the more detailed the time entry is, the more likely you will not need to enter a credit in the first place.

11.   Most importantly, Leaking Time. The longer you wait to enter time the less accurate it is, and engineers tend to error on the side of billing less time.  What they don’t realize is at $100/hour, leaking only 15 minutes per day times 5 days per week times 52 weeks is $6,500 per engineer per year.

One last ditch effort I’ve used in the past is to actually have the time challenged engineer come in to the office and actually do the time billing.Arm the engineer with this information.  If they still can’t change their bad habit and enter their time real-time, the overall disruption they cause outweighs ALL of the positive traits of the engineer and they have to go!