An Essential Guide to Time Tracking for Project Managers

A client project can be on schedule and still use far more hours than you quoted. By the time the invoice is due, the extra meetings, revisions, and follow-up calls are already part of the cost.

Time tracking gives project managers a way to compare the work delivered with the effort it took. For an accounting engagement, legal matter, or consulting project, the useful routine starts with an estimate, continues with a weekly review, and ends with better evidence for billing and the next quote.

How time tracking helps professional services project managers

Time tracking connects each person’s work to a client, project, and activity. Comparing those records with your estimates helps you spot overruns, review workloads, and explain the work behind an invoice.

Hours alone don’t tell you how much of a project is finished. Pair them with a check of completed deliverables and an estimate of the work still to come. A team that has used half its time budget may have much more than half the work left.

For hourly engagements, these records support billing. For fixed-fee work, they show how much effort the agreed price needs to cover. Both need complete records, including time you won’t charge separately.

Set up the project before the first entry

Choose a tracking structure that will answer your questions at the weekly review. Too little detail hides the cause of an overrun; too many categories make it harder for people to choose the right one.

Match the categories to the work

Keep the client, engagement, and activity distinguishable. For example:

• An accounting practice might track a year-end engagement under the client, with activities for records preparation, accounts, review, and client queries. A bookkeeping team could use the same approach for each monthly close.
• A law firm might track a matter under the client, separating research, drafting, meetings, and correspondence.
• A consultancy might split a project into discovery, analysis, recommendations, and handover.

Use the same categories for your estimate and your time records. If the quote groups all delivery work together but the timesheet has twenty categories, decide how those entries will roll up before work starts.

Set an hours budget and record its assumptions

Estimate hours by phase or work type. Include project management, internal reviews, and client communication alongside the main deliverables. Record what the estimate assumes: the quality of the client’s records, the number of review rounds, or when feedback will arrive.

For a fixed fee, the hours budget is an internal allowance for delivering the agreed scope. It doesn’t change what the client owes. For hourly work, distinguish your internal estimate from any fee cap or billing arrangement agreed with the client.

Keep the original estimate when the plan changes. Record approved additions separately so you can tell whether extra hours came from new scope or an underestimate.

Agree what a useful time entry contains

Ask the team to record the date, client, project, activity, duration, and a short description of the work. “Reviewed year-end accounts and sent queries on missing receipts” gives a reviewer more to work with than “client admin”.

Set a clear expectation to log time during the day or before finishing work. Use a timer where it fits, and let people add missed entries with a useful note. Project managers should include their own coordination and review time too.

Keep billable status separate from whether the work happened. An internal correction may be unbillable, but leaving it out would understate the effort needed to deliver the project.

Run a weekly review of hours and remaining work

Before reviewing the budget, check that the team’s entries are complete and assigned to the right project. Then work through four questions:

1. How many hours have we used, by phase or activity?
2. Which deliverables are complete, and what remains?
3. How many more hours do the people doing that work expect to need?
4. What decision does the difference require, and who will act on it?

A simple forecast is hours already used plus estimated hours still needed. Compare that forecast with the original budget. Subtracting used hours from the budget only tells you the allowance left; it doesn’t tell you whether that allowance is enough.

Worked example: a 60-hour advisory project

This is an illustrative consulting project, not customer data. The team allowed 60 hours for a fixed-fee engagement. At the weekly review, they have logged 40 hours and estimate another 30 to finish.

The budget has 20 hours left, but the team expects to need 30. The forecast is 70 hours: 10 hours over budget, or about 17%.

Using 40 of the budgeted 60 hours doesn’t mean the project is two-thirds complete. In this example, analysis still needs work and most of the recommendations and handover remain.

Turn the forecast into a decision

Suppose the extra effort comes from cleaning up source data that the quote assumed would arrive ready to use. The project manager can explain the difference to the client while there is still time to agree a response.

If it is additional scope, discuss the extra fee or a change to the deliverables before doing the extra work. If it is an internal underestimate, decide how to deliver the agreed work and record the lesson for future quotes. If a particular person is overloaded, review staffing and deadlines; adding someone doesn’t automatically reduce the total hours required.

For an illustrative fixed fee of $9,000, the original 60-hour budget allows $150 of revenue per delivery hour. At 70 hours, that falls to about $129. Those figures are revenue per hour, not profit: staff costs, other delivery costs, and overheads still need to be accounted for.

Project budget and billing tracking gives the manager a place to monitor recorded hours and billing detail. The remaining-work estimate still needs the team’s judgement.

Keep project effort, billing, and payment distinct

The weekly forecast tells you whether delivery is on track. Other measures answer different questions, so use consistent definitions when discussing the results.

Billable utilisation: where available time went

Billable utilisation is billable hours worked divided by available working hours, multiplied by 100. In an illustrative 40-hour week, 28 hours of billable work gives 70% utilisation, whether or not those hours have been invoiced yet.

Agree how leave, training, and internal duties affect available hours before comparing people or periods. A manager’s role may include substantial non-billable work. For fixed-fee teams, also look at total delivery hours against the engagement budget; higher billable utilisation alone won’t show whether the fee covers the work.

Realisation: how much billable work reached an invoice

Realisation measures how much recorded billable work gets invoiced after reductions or write-offs. Payment collection is a separate measure. Clio’s definitions of law-firm KPIs make this distinction explicit.

For a simple example at one hourly rate, recording 100 billable hours and invoicing 90 gives 90% realisation. If the client hasn’t paid yet, that affects collection, not the proportion invoiced. Where rates differ, use a consistent value-based calculation rather than treating every hour as worth the same amount.

Work in progress: what is still unbilled

For this billing review, work in progress (WIP) means billable work recorded but not yet invoiced. Check whether entries are waiting for review, a billing milestone, or missing detail. Follow the agreed billing schedule; an unbilled balance isn’t automatically overdue.

Use these measures to find the next action. Missing entries need completing, an overrun needs investigating, and an unpaid invoice needs following up. One percentage cannot diagnose all three.

Close the project with better billing and a better next estimate

Review the time records before preparing the final invoice. Confirm the client, scope, descriptions, billing rates, and any agreed adjustments. For hourly work, select the entries to invoice. For fixed-fee work, use the agreed charge and retain the hours for your delivery review.

With MinuteDock’s integrations with accounting platforms, you can build an invoice from selected time and send it to your connected system, such as Xero or QuickBooks. Xero receives a draft invoice for approval and sending there. Review the invoice before sending it to the client.

Once the work is complete, compare actual hours with the original estimate by phase. Record the reason for each significant difference: extra scope, missing information, rework, or an estimate that was too optimistic. Keep the final scope and assumptions with the result so the next quote is comparing similar work.

MinuteDock’s reporting tools let you review recorded time by client, project, task, and team member. Use those records alongside your estimates and cost information. Time data supports a profitability review, but hours and charge-out rates alone don’t calculate profit.

Choose a tool that supports the routine

Time tracking software for project managers should make it easy to switch between client jobs, add useful descriptions, review hours against project budgets, and prepare billing detail. Check those steps using a representative project before asking the whole team to adopt it.

Project planning still needs its own view of deliverables, owners, deadlines, and dependencies. Keep that plan alongside your time records. MinuteDock supports team time tracking, reporting, budgets, and billing; it doesn’t replace the project plan or the manager’s judgement about the work remaining.

Start with one client engagement and one weekly review. Use what the team records to make a real scope, staffing, or billing decision, then adjust the categories and review routine where the detail is missing.