What is a Timesheet?

A timesheet is a physical or virtual tool that allows you to record and keep track of your worked time.

That means that, as an employer, you’ll be able to see exactly how many hours each employee has worked.

Timesheets were formerly known as time books. They were first used in the 19th century as a paper sheet that included tasks, workdays, and work hours written on it. Employees would stamp them through time clock machines when they arrived or left work. These were essential in determining a worker’s wage.

What a time book looked like. Metcalfe’s “Systems of cost accounting,” 1885.

But it’s 2024, so everyone uses timesheet software, whether an agency or a solopreneur, to log working hours with a few clicks—unless you want to write by hand. Tedious tasks like handwritten timesheets are a fine example of modern-day torture.

Timesheet basics

Timesheets are fundamental for tracking employee time and are essential for accurate payroll, client billing, and maintaining compliance with labor laws and company policies. An accountant plays a crucial role in overseeing the accuracy and integrity of timesheet data within an organization.

Whether you are an accountant, manager, or business owner, here’s what a timesheet informs you of:

• Employee information: Timesheets typically start with basic employee information such as their name, employee ID, department, and sometimes their position or job title.
• Time entries: A timesheet records the time worked by the employee. This includes the date, start and end times for each work period, and the total hours worked for that day.
• Task/Project breakdown: Often, timesheets require employees to allocate their hours to specific tasks, projects, or clients. This breakdown is essential for businesses to understand how time is spent across different activities.
• Total hours: The total number of hours worked during the designated period is calculated. This could include regular hours, overtime, vacation time, sick leave, or other types of leave.
• Approval and signatures: After the employee fills in their timesheet, it usually requires approval by a supervisor or manager. Signatures or electronic confirmations validate the accuracy of the recorded hours before they are processed for payroll or billing purposes.
• Accuracy and compliance: Accurate time reporting is crucial for payroll processing, client billing, and compliance with labor laws. Accountants often ensure timesheets comply with company policies, government regulations, and industry standards.
• Integration with payroll or billing systems: Once verified and approved, the timesheet information calculates employee wages or salaries for payroll processing. For client-based work, timesheet data might also feed into billing systems to invoice clients accurately.
• Recordkeeping and documentation: Timesheets are necessary for auditing purposes, internal analysis, and legal compliance. They should be stored securely and retained according to company policies and regulatory requirements.
• Communication: Clear instructions and guidelines for filling out timesheets help ensure accuracy and consistency across the organization. Accountants might provide training or guidance to employees on proper timekeeping practices.
• Goal alignment: glancing at the weekly or monthly timesheet will let the project owner know whether time was spent efficiently on initiatives and tasks for that specific goal.

What is the purpose of a timesheet?

Their main use in a work environment is payroll, human resource management, and accounting. Timesheets work like a database that contains all the needed time entries for employers to pay workers fairly. These also prove your work if you don’t have another similar solution in place yet.

You can also use timesheets in project management—if you’re a project manager or part of the HR department. (If you’re new in this field and you’re wondering what are the next steps in the project management career path, further your education by reading this reference guide.)

Knowing how much time your team spends on tasks can help you spot time management problems and improve your work processes. Time tracking is one of the best methods for accurate time reporting, especially when working in a team.

Paired with other methods and tools, timesheets increase transparency. More people will see how long you’ve worked, how many breaks you took, and when you took a day off.

It’s also a clear list where your staff tracks time for proof of work. In the case of virtual timesheets, like project management software or time-tracking software, project managers can see what the others have worked on and for how long.

By counting the exact hours spent on tasks, you’ll also calculate the project cost, your employees’ engagement rate, and what resources you’ll need.

Online tools can allow you to add time according to a specific project or task:

Add time in bulk in Paymo

Employees can even use them to improve their productivity. They’ll be able to see exactly how many hours they’ve spent on a task and visualize how they spent time on a daily basis.

Get a glimpse of your daily timesheet, tasks, and due dates in Paymo’s “My Day”

Increased transparency and objective data can help you gain the trust of your employees. They will no longer question whether the others are working as much as them or if managers pay them less than they deserve.

One of the most important advantages of timesheets and the reason for their widespread use is the fact that they allow all employees to know how much they are working.

For typical 8-hour schedules, all employees must add daily hours that match that threshold.

Companies can benefit because managers will get an overview of where their money is going. As a result, they can lower costs or stop investing money in areas that don’t make financial sense and redirect those funds to more profitable activities.

Thanks to Paymo’s profitability tracking and quantitative employee performance stats, business owners can keep a watch on the health and vitality of their business. If that’s you, explore Paymo for business owners.

Moving on to the importance of time for payroll and accounting. If you get paid based on billable hours, a timesheet will be your first piece of proof that you can show to justify your earnings.

Freelancers and hourly workers can use these timesheets to compare their previous time entries with each other or to make realistic estimates for future projects.

Timesheet use cases

In a nutshell, there are two directions (internal and external) and four main use cases for timesheets:

1. Payroll and wage management: timesheets are primarily used for calculating employee wages or salaries based on the hours worked. They provide the necessary data for accurate payroll processing, including regular hours, overtime, vacation time, and other types of leave.
2. Project management: in project-based industries such as architecture, construction, or software development, timesheets help track the time spent on specific tasks or projects. This information is crucial for project costing, budgeting, and determining the profitability of projects.
3. Service-based industries: in law, mediating, consulting, freelance work, or for businesses offering services on an hourly basis, timesheets are essential for accurately billing clients. They provide a detailed breakdown of the time spent on different activities, enabling accurate invoicing based on actual work performed.
4. Resource management: timesheets help managers understand how employees distribute their time among various tasks or projects. This information aids in resource allocation, identifying bottlenecks, and optimizing workflows by assigning resources effectively.

Timesheets are kept internally for audits, compliance and legal requirements, performance evaluation, internal analysis and improvement, forecasting and planning, etc.

Timesheets are sent externally for various stakeholder reporting or client management. Timesheets are sent as time reports, mainly attached to invoices. Below is an example of how to do it automatically in Paymo:

When sending invoices in Paymo, you may attach a customizable generated timesheet report.

Digital versus paper timesheets

You’re less likely to lose data with cloud-based online tools than with paper timesheets. Covering yourself with all the papers? Most of these store your data securely on servers or in the cloud for many years to come and can even make searching through all the clutter easier.

Believe it or not, some companies are still using paper-based timesheets, like this PDF file. This is because physical timesheets have advantages like saving costs and keeping the entire process simple.

However, the downside is the employees are likely to lose these timesheets and thus end up with no evidence of their work to show to their supervisors. Also, searching through archived timesheets is much harder than through software. The latter sorts all documents according to your preferences, so you’ll identify what you need faster.

Pairing electronic timesheets with advanced project management or invoicing tools can ease the managers’ work. To better understand when you should invoice and the benefits of invoicing, read our invoicing 101 guide.

These tools make archiving, reporting, and billing easier through automated tools and processes.

Online timesheets also let you see your worker’s hours in real time without having to wait for the paper documents to go through the HR department until they finally get to you. This way, you’ll cut a lot of the wasted time wasted as they move from one department to another.

The most important benefit of digital timesheets is that they usually come with a time-tracking solution. This allows employees to monitor the hours they spend on specific tasks or projects, making the time-tracking process easier.

Some tools automatically transform your worked hours into timesheets and reports. This will help you save time on organizational tasks and dedicate more attention to what is important for your project in the long run.

Like other tools, the best online employee time tracking software will immediately add the time logs tracked with their stopwatch into your timesheet. If you’re afraid you’ll forget to start and stop the time watch, you can add time manually or in bulk. However, these two timekeeping solutions are not as accurate when it comes to estimating worked hours as tracking time in real-time using a stopwatch is.

Download Paymo Track for free.

In the digital vs. analog debate, choosing digital depends on how willing you are to invest in a digital system or if you just want to stick with the classic paper-based process.

Take into account the needs of your team and existing HR systems. Don’t take our word for it, but test both options for a month to see which one will fit your organization.

A digital tool is the uncontested winner, especially if your employees are working remotely.

Working remotely means they must come by the headquarters to submit their papers. Or, if you’re not using digital timesheets, you’d have to send them via postal mail or devise a separate solution, which is time-consuming and prone to errors.

We urge you to opt for a digital timesheet solution, even if that’s Excel.

You might need light or advanced timesheet tools depending on your team size. If your team is small, a simple tool could do the job for you.

However, as your company grows, you’ll need to reconsider using timesheets and other tools. These will help you work more efficiently and cope with the increased workload.

How does a timesheet work?

Companies ask employees to use timesheets to monitor the time they spend on and off work. Employers can approve timesheets or ask for proof to see if a worker has spent the added time productively.

The entire procedure is very simple. Employees add their exact work time, breaks, or vacation days according to every day of the week. The data is then sent to the HR managers or logged in the timesheet software. Lastly, it will be added to the archive or receive the approval of the employees’ managers before being stored.

Most companies will tell you exactly when and how you should complete your timesheet, as there are timesheet policies in place. These documents contain the necessary information, including which tool you’re supposed to use, how your time is checked, and when you’re supposed to send the timesheets.

For instance, your company might want you to complete your timesheet at the end of each day or at the end of a full workweek.

Your duty of adding work time on a regular basis increases work accountability. Employees are the ones responsible for adding and monitoring their own time. This prevents people from wasting time as you can ask them to validate the work they claim to have finished. So they will be less likely to waste time on non-productive activities.

Here’s what a digital marketing team member’s weekly timesheet could look like:

In our example, the team member works on short- and long-term tasks from four different projects. We took the classic case of a general 9-to-5 workday with a flexible one-hour break. Notice how some days are dedicated to a single type of activity (for deep work) while others are filled with various activities, priorities, or client requirements.

How did AI change timesheet management?

AI has significantly changed timesheet management by introducing automation and intelligent features. It streamlines the time-tracking process, improves accuracy, and provides valuable insights for both employees and employers. Here are some ways AI has impacted timesheet management:

1. Smart timesheets: Machine learning is being used to create “smart” timesheets and time trackers, simplifying and automating the process for improved compliance. It populates timesheets based on work patterns.
2. AI-powered time tracking: AI technology automatically records and categorizes tasks and activities, ensuring accuracy and preventing human errors. It also provides powerful reporting and actionable insights.
3. Automated time tracking: AI-powered time tracking software can automatically track time spent in various applications and generate precise daily records, reducing the need for manual input and saving time.
4. Timesheet chatbots: AI-powered chatbots, such as those powered by OpenAI’s GPT, can be used to describe work activities and automatically fill in timesheets, making the process more efficient.

Of these four, Paymo shines in automated time tracking thanks to Paymo Track. Employees simply leave their desktop app running, and the app automatically records work activity. To avoid AI mishaps, the user has to click and approve each time stamp, taking no more than a few minutes a day.

I get the need for timesheets, but where do I start?

Consider your company’s needs if you’re unsure how often you should use a timesheet. Usually, organizations use timesheets for payroll. This means that they actually only need the timesheet once a month. But, employees wouldn’t be able to remember what they’ve done each day after such a long time has passed. For this reason, there are roughly five types of timesheets you can choose from:

• Daily timesheets – employees log their time at the beginning and end of each workday
• Weekly timesheets – employees log their time for all five workdays at the end of every week
• Biweekly timesheets – workers send in their work hours every two weeks on a specific day
• Monthly timesheets – employees send their timesheets every month on a date you chose
• Semi-monthly timesheets – workers can send their timesheets twice a month

If you’re hesitant to bring timesheets into your organization, remember that using these doesn’t have to be complicated.

Online apps make it even easier to add work time if their interface is simple and they come with instructional guides or videos. Shifting from paper-based timesheets to virtual ones shouldn’t be hard if you test all the tools that match your needs.

Conclusion

Most timesheet software comes with instructional guides or videos, making adding time entries and managing everything you need even easier.

Shifting from paper-based timesheets to digital ones is absolutely crucial in the day and age of hybrid and remote work. You can read other timesheet software reviews online, such as this top 6 timesheet software list. Test them out and see which one works best for you.

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