A mismanaged payroll process translates into pricey IRS penalties. In 2017 alone, civil penalties to the IRS affected over 5 million employers and amounted to jaw-dropping $7 billion. This is just one aspect of how using paper timesheets can cost you time and money.
If you want to know why the traditional manual time cards should stay in the past, keep reading!
Forget About Paper Timesheets and Manual Data Entry.
Historically, timesheets (also known as manual timesheets or manual time cards) were tracked on paper. The traditional paper time tracking method boils down to a data table. Its primary purpose is to record the amount of time each employee spends doing their job or a particular task.
In case you are wondering whether paper timesheets can hurt your business - the answer is a firm yes, and this article covers why it is so.
Inaccurate Data: Lost Productivity, Payroll Filing Errors and More
Whether deliberate or accidental, the misreporting costs USA employers within the professional services sector a whopping $52,000 in billable hours per professional per year. AffinityLive, the company that conducted this study, estimates that this equals 50 million hours lost in productivity.
That is how crucial accurate time tracking is!
Paper Timesheets Can Result in Payroll Processing Errors
Unfortunately, there's a more significant potential for human error with paper timesheets.
They are not just more time-consuming. They make mistakes almost inevitable. One of the reasons manual time cards are so error-prone is that they are often based on memory, meaning they are inaccurate and unreliable.
Perhaps you remember the Ebbinghouse and his finding on the forgetting curve? Disappointingly, these findings indicate that humans tend to retain only 23% of what they learn after six days. So, imagine your staff filling out timesheets after several days!
And on the other hand, there is a question of handwriting. Paper timesheets contain manual entries - meaning the writing can be sloppy or too fancy and ultimately challenging to read. It can lead to errors by itself.
And to add insult to injury, it's much easier for fraudulent employees to skirt the rules with this type of time tracking. We'll address this issue in one of the following sections more closely.
But to wrap it up for now - the inaccuracy related to manual timesheet usage is a liability for your business. It can lead to costly IRS penalties, or you can end up overpaying the workers hours they haven't worked.
Wasted Resources: Time and Financial Costs
Time is one of the highest costs of paper timesheets. But what does this time cost of handling paper time tracking include? Let's take a look!
Time Spent on Handling Paper Timesheets
To better understand it, we need to examine the lifecycle of a manual timesheet. What does its handling encompass?
Well, more than you may think: ordering, printing, distributing to the entire team, filling them out, collecting them, and in the final phase: manually reviewing them, calculating hours and wages for each worker.
And of course, entering this data into your payroll system, and lastly - filing paper timesheets.
These steps require time even in ideal conditions. But if just one of your employees hasn't filled out or submitted their paper timecard on time, the entire process gets prolonged.
This leaves you in a time crunch to process paper timesheets and run the payroll on time.
Manual time cards also require reordering and restocking, and they come with a particular price tag. It may not be much, but it adds up over time. There are certainly more valuable ways to spend that money, whatever your business is about.
Time Spent on Doing Payroll
Completing payroll duties on time while reading poor handwriting and dealing with mistakes in manual time cards is both stressful and time-consuming. And again, it can result in costly mistakes for your business in case of payroll errors.
Modern-day time tracking apps enable integration with payroll software which relies on quick and easy export of electronic timesheets. This way, the payroll process is immensely simplified, and the possibility of human errors is eliminated.
Physical Storage Space for Keeping the Records
Employers need to follow specific record-keeping rules and maintain their employees' records to stay legally compliant. This includes the time and money costs of having a physical storage space over many years.
With time tracking apps and electronic timesheets, there are no such costs.
There's More Room for Exploitation: Time Theft, Buddy Punching & Rounding Up Time
Your employees don't have to steal office supplies or cash from the till drawer to harm your business's finances. But unfortunately, the phenomenon of time theft is almost an invisible cost on your company's payroll. It may be difficult to pinpoint, but it sure can hinder your organization's growth.
Fudging a manual time card here and there, rounding up time, or deliberately extending breaks and entering false data tend to add up quickly. Essentially, you are paying for the time that hasn't been worked.
The Hidden Effects of Time Theft: It Costs More Than You Think
Although rounding up time for a few minutes may seem innocent, the official statistics on the time theft is a bit grim. It's estimated that 75% of businesses in the U.S. are affected.To add fuel to the fire, in a survey from 2015, almost half of hourly employees (43%) confirmed they resort to some type of time theft.
Nearly half of those who committed time theft had recorded incorrect times when they clocked in or out. It was the most common method of time theft. And with paper timesheets, it isn't challenging to do.
A quarter of the surveyed employees who've admitted to stealing time have done it through buddy punching. Taking frequent breaks and conducting personal activities while on the company's hours were also prevalent among the surveyed workers who've committed time theft.
I'll give you a clear example of this harmful practice from my previous workplaces.
There was a guard at that job site's front gate responsible for tracking when employees came to work and left the premises. He would write down the same time for each employee - when we were supposed to show up, even if we were late.
And he did the same thing when our shifts ended: even if we left a bit earlier, for whatever reason, he would still enter the exact time when we were supposed to go. And what's even worse - he wasn't the only one who did it!
To Conclude: Using a Paper Time Tracker Provides No Security
Employees tend to round up time, even unintentionally. On the other hand, it is incredibly easy for opportunists to add fraudulent times. This is one of the reasons why so many companies have decided to shift towards electronic timesheets.
How Can an Automatic Timesheet Software Help?
Digital products are being perfected all the time to stop the above-mentioned negative work behaviors and prevent businesses from suffering the loss of it. Of course, these digital solutions are allies in eliminating accidental human errors.
Timeero time tracker app is designed to hold your employees accountable and to defend your business against individuals who commit time theft. The app provides users with a breadcrumb trail of where your employees are in real-time or where they have been). They include timestamps and precise GPS locations too.
With all this data it’s much easier to:
track time spent on particular jobs, tasks, or projects for each employee.
pinpoint behaviors like taking longer routes, extended breaks, or spending a suspicious amount of time at a particular site.
Manage your workforce effectively
This is where Timeero stays on top of the competition. The breadcrumb trail with timestamps and real-time full team visibility on the field sets this software apart from numerous similar apps.
Paper Timesheets Can Hinder Work Productivity
Paper time tracking is a slower, less productive, and more complex way compared to electronic timesheets. Time-consuming tasks without a significant ROI are another, hidden cause of lost productivity. They are difficult to pinpoint without digital time tracking.
Fortunately, it enables categorizing working hours and logging them as billable and non-billable or tracking tasks around tickets separately. This gives you extremely beneficial insight into where time is being spent.
And with that, you can eliminate less profitable tasks and free your time for more complex and meaningful ones that bring more revenue.
Poor Scheduling: Over- and Under-Staffing
With piles of paper files and your workforce data scattered across numerous documents, it's much easier to make mistakes when managing your workforce. For example, not scheduling anyone for too many hours can't be emphasized enough.
If your employees are overworked and don't have enough time to rest between shifts, they are more likely to take extended breaks or show up late. It's important to note that these behaviors may not be malicious at all. Nevertheless, it can be challenging for overworked staff to stay on schedule.
With paper timesheets, it's much more challenging to schedule effectively. This is where time and attendance software like Timeero can be game-changing. It allows you to filter available employees and not overload one employee while others crave more work.
Aside from that, the right time tracking software with a scheduling feature will ensure your team members have time for a proper break between shifts.
Legal Issues: Sticking to Record Keeping Rules
Employers who use paper timesheets need to pay attention to important regulations on record-keeping requirements. Timesheets are mandatory, and according to The Fair Labor Standards Act (FLSA), employers are responsible for tracking their staff's hours (including regular ones, overtime, and time off) and maintaining these records over a specific period.
When your documentation is non-compliant, it can result in legal issues and, unfortunately, costly penalties. And, of course, having inaccurate data leads to incorrect calculations of payroll taxes. And this is followed by high-priced penalties too.
The main reasons for these issues come down to inaccurate timekeeping. A lack of well-organized historical payroll data has also been cited as a frequent problem.
Aside from all that, paper timesheets are fragile and perishable. They can be misplaced, damaged, or destroyed. So it's a liability for your business.
IRS Audits are not the only problem for business owners. Employee lawsuits for unfair pay can be just as troubling. However, keeping precise and accurate records of employee hours is your shield against several potential legal issues.
Moving to digital time tracking systems and electronic timesheets helps businesses have stellar record-keeping. Also, it eliminates the need for physical storage space, which saves time and money.
Ultimately, going paperless is not just cost-effective. Still, itallows for more effective access to employees' documents and easier retrieval.
Going Digital: Tracking Time Has the Potential to Recover Leaked Revenue
The above-discussed study featured in Harvard Business Review showcases how poor time tracking habits can lead to considerable loss of income. It argues that moving to daily timesheets could save businesses $52,000 per professional, per year, in billable hours.
The study gives a vivid imaginary example of a 15 person company that provides professional service. According to their estimates, it could add a staggering $1.4 million to their revenue if they'd manage to capture lost time.
If you're wondering how digitized time tracking works, check the section below!
How Do Electronic Timesheets Work?
Electronic timesheets are a great alternative to outdated paper ones. With the right software at your fingertips, there are no more time-consuming manual entries and collecting time cards from your team. Reviewing them, deciphering poor handwriting, and calculating payroll will become a thing of the past too.
Let's take a look into how Timeero's digital timesheets and time tracking work. This way, using a real-life example, you'll get a better picture of how electronic timesheets work.
The entire process starts by inviting your team members to join Timeero. Then, they'll receive an email or an SMS notification with a link to download the app and log in.
After they've logged in, all they have to do is choose a job or a task they work on and hit the "clock in" button! Easy as that.
Once the timer is started, it can track time and mileage, depending on its configuration. GPS locations with timestamps and a breadcrumb trail of where your employees are are also captured.
Tracking stops when a user hits the stop button.
The app can even be configured to automatically send clock in or out reminders when they arrive or leave a location. And as a plus, it allows employees to capture notes take photos, and breaks when needed.
If you need more information, you can check out our Mobile Guide.
Timeero: A Better Approach to Time Tracking
To sum up, the Timeero app provides you with a bird's eye view of practically everything happening in the field. You can check where everyone is at any time or where they have been.
This way, it's nearly impossible for your workers to take longer routes, extended breaks, or run personal errands while on the clock. And the possibility of recording wrong times is eliminated.
Why You Should Make a Shift Towards Electronic Timesheets
Now that you've come this far, you may be wondering what are the implications of all that's been said for your business. With the proper methodology, a.k.a. software with time tracking feature and electronic timesheets, you can expect several valuable benefits for your business:
Have a big picture view of your business: insight into overtime hours, frequency of absence, or sick leave volume. This allows you to react timely if you notice anything unusual.
Effectively manage your workforce: improve scheduling, nurture motivation and team morale, and prevent dips in productivity.
Improve data accuracy and eliminate payroll processing errors
Avoid time theft and improve accountability in your team members.
Identify and eliminate less profitable, time-consuming tasks.
Adopt record-keeping best practices: stay legally compliant and avoid costly penalties.
Recover leaked revenue
Ultimately, all listed items lead to considerable savings in time and money!
Eliminate Poor Time Tracking Habits Once and for All!
AffinityLive's study published in Harvard Business Review we've mentioned before has shown that poor time tracking habits result from a cumbersome process. It's human nature - if something is too complicated, it's more likely that people won't do it or won't do it properly. So, why set yourself and your business up for failure?
The solution is literally at the tip of your fingers: time tracking software that doesn't require much time or effort to fulfill its purpose. And what's less burdensome or time-consuming than a few clicks of a button?
How Can Timeero Give Your Business a Competitive Advantage?
At Timeero, we wanted to take things a few steps further, so we've built our app in a way that can provide accuracy, clarity and give you a birds-eye view of your team while saving you time and money. And it comes with scheduling and mileage tracking features and integrates with payroll software.
Vesna is a psychologist, researcher, and writer with a wide range of interests focused on one goal: utilizing digital solutions to take businesses to the next level. Her expertise in human resources and workforce trends combined with her understanding of software’s role in business optimization is invaluable in helping them stay on top of the curve.