Financial reports help businesses see how they're doing and make better decisions. In this series, each article will explain a specific report, covering what it is, why a CPA needs it, how the numbers are calculated, and a simple example to show how it works. Whether it's about tracking income, managing costs, or checking how well your team is working, these articles will give you the basics to make sense of these important reports.
Hours Tracked by Client
What’s in this Report?
Does include:
Archived and deleted Time Entries
Does not include:
Archived and deleted Time Entries
Deleted clients
📊 What is an Hours Tracked by Client Report?
A Hours Tracked by Client Report is a document that details the number of hours spent on work for each client by a business or organization. This report is significant for service-based companies where billing is often based on the number of hours worked. It provides a breakdown of the time employees or contractors have dedicated to each client, which is crucial for accurate billing, project management, and resource allocation.
👨🏻💼 Why Would a CPA Need It?
A CPA would need this report for several key reasons:
Accurate Billing: The report ensures that clients are billed correctly based on the actual hours worked. It helps verify that the hours recorded match the hours invoiced, reducing the risk of errors or disputes.
Revenue Analysis: By tracking hours by client, the CPA can analyze which clients generate the most revenue and identify any clients that may be unprofitable due to excessive time demands relative to the revenue they bring in.
Cost Management: The report helps in understanding the labor costs associated with each client. The CPA can compare these costs to the revenue generated to determine profitability on a per-client basis.
Time Management and Productivity: The report provides insights into how effectively the company is using its time and resources. It can highlight inefficiencies or imbalances in how time is allocated across clients.
Budgeting and Forecasting: The CPA can use the report to forecast future revenue based on past hours tracked and to create more accurate budgets by estimating the time required for ongoing or future projects.
Client Relationship Management: Understanding the time spent on each client helps the CPA and management assess the level of service provided to different clients, which can inform decisions about pricing, resource allocation, and client prioritization.
🔢 How is the Math Calculated for This Report?
The math behind an Hours Tracked by Client Report involves several key components:
Tracking Hours:
Hours worked are typically tracked using time-tracking software or timesheets. Employees or contractors log the hours they spend on tasks or projects for each client.
Summing Hours by Client:
The total hours worked for each client over a specific period (e.g., a week, month, or project duration) are summed. This gives the total number of hours billed or to be billed to each client.
Calculating Billable Amount:
If the business bills clients by the hour, the billable amount for each client is calculated by multiplying the total hours worked by the hourly rate.
Billable Amount = Total Hours Worked × Hourly Rate
Comparing to Estimates/Budgets:
The actual hours tracked can be compared to the estimated or budgeted hours for the project or client to assess whether the work is on track, over budget, or under budget.
✏️ Example Calculation:
Let’s assume a company has tracked the following hours for two clients over a month:
Client A:
Hours Worked: 50 hours
Hourly Rate: $100 per hour
Client B:
Hours Worked: 30 hours
Hourly Rate: $150 per hour
Calculations:
Client A:
Total Hours Worked = 50 hours
Billable Amount = 50 hours × $100/hour = $5,000
Client B:
Total Hours Worked = 30 hours
Billable Amount = 30 hours × $150/hour = $4,500
The report would show that 50 hours were worked for Client A, resulting in a billable amount of $5,000, and 30 hours were worked for Client B, resulting in a billable amount of $4,500. This information allows the CPA to ensure accurate billing, analyze client profitability, and provide valuable insights into time management and resource allocation.