Project hours reporting is how you find out what each project actually cost you: every employee logs how many hours they worked and for which client, project and task, and you multiply those hours by the cost of a work hour. What the client pays, you already know from the quote. What the work cost, only the hours can tell you.
This guide is for business owners and project managers who price work for clients: accounting firms, advertising and design studios, engineering firms, software companies and service providers. It covers how to set up the reporting, how to work out what an hour costs, and how to turn the hours into a short monthly check of the profit on every project.
Why hours decide whether a project made money
In a business that sells work, hours are most of the cost. There is no stock and no raw material: there are people, and their time. That is why two projects at the same price can end up in completely different places. On one, the team finished in the time you planned. On the other, there were three rounds of revisions, a meeting that ran long and a last-minute change, and each of them added hours.
Without project hours reporting, you can't see that difference. Salaries go out at the same amount, the invoice goes out according to the quote, and both projects look profitable. At the end of the year you find the profit is smaller than you expected, with no way of knowing where it went.
Once hours are recorded by project, you can answer three questions:
- What the project actually cost, not what you estimated it would cost.
- Which client is profitable, and which one takes more hours than it pays for.
- What to charge in the next quote, based on what similar projects really cost.
Setting up project hours reporting: client, project, task
An hour logged in the wrong place tells you nothing. The simplest structure has three levels:
- Client: who the work is for. For example, a retail chain.
- Project: the work agreed with the client, usually based on a quote. For example, a new website.
- Task: a stage or type of work within the project. For example, specification, design, development, client meetings.
That way each hour is logged once, and you can add it up at any level: what the client cost this year, what the project cost, and which stage took the most time.
One day, for example: an employee at a design studio works 8 hours and reports on three projects:
- Retail chain, new website, design: 4 hours.
- Accounting firm, annual brochure, revisions: 3 hours.
- Internal project, team meeting: 1 hour.
By the end of the day every hour already sits with the right client, and at the end of the month you add up the days and see how many hours went into each project. At a cost of ₪96 an hour (the calculation follows below), the 4 hours on the website cost ₪384.
Four rules that make the difference:
- Tasks that follow the stages of the work. "Design" and "Revisions after client feedback" tell you far more than "Ongoing work".
- A separate task for revisions and changes. This is where projects lose the most money, and it's the number you'll want to show the client when you ask for an extra charge.
- An internal project for hours that don't belong to a client. Training, team meetings, quotes for work that hasn't been signed yet. These are work hours too, and it's worth knowing how many there are.
- Report the same day, not at the end of the week. Anyone reconstructing on Thursday where Monday went ends up rounding and guessing. Reporting has to be easy enough to happen the moment a task is done.
In ProperTime, you set up clients, and under each client its projects and tasks. Employees use the hours reporting system to log how many hours they worked on each task, from the Android or iOS app or on the web, and anyone who forgot to report gets a reminder.
What a work hour costs you
To turn hours into money, you need one number per employee: what an hour of their time costs you. That is not the hourly wage on the payslip. On top of gross pay come the employer's National Insurance (Bituach Leumi) contributions, pension, severance and recuperation pay (dmei havra'a), and you also pay for vacation days, holidays and sick days when the employee didn't work.
The simple calculation:
- Take the employee's annual employer cost: gross pay plus everything the employer adds on top of it.
- Divide it by the hours the employee actually worked in the year, excluding vacation, holidays and sick days.
For example: an employee with a gross salary of ₪12,000 a month costs her employer about ₪173,236 a year. Say she actually worked 1,800 hours in the year. An hour of her work costs you about ₪96 (173,236 divided by 1,800).
Three things to keep in mind:
- Not every hour is a client hour. Team meetings, training and preparing quotes are part of the job, but they don't go into any project. If only 1,400 of the employee's 1,800 hours were logged to client projects, each of those hours needs to cover about ₪124, not ₪96.
- This number covers the employee only. Rent, equipment and software are further expenses. You can add them as a fixed percentage on top of the hourly cost.
- You don't need a separate number for every employee. A small business can start with two or three levels: junior, senior and partner.
Compare with the quote
A quote is really an estimate of hours. Even if it shows a single amount, there was a calculation behind it: how many hours it will take, times what an hour costs, plus profit. Project hours reporting tests that estimate against what actually happened.
For example: a quote of ₪18,000 for a project estimated at 120 hours, at a cost of ₪96 an hour. In practice, 165 hours were reported on the project.
| Per the quote | Actual | |
|---|---|---|
| Hours | 120 | 165 |
| Cost of the hours | ₪11,520 | ₪15,840 |
| Profit | ₪6,480 | ₪2,160 |
Forty-five extra hours wiped out two thirds of the profit. Now the important question: where did the hours go? When they're logged by task, the answer is in the report. Maybe the specification took twice as long, maybe there were four rounds of revisions instead of one. That is something you can fix on the next project: price the specification differently, state in the quote how many rounds of revisions are included, or ask for an extra charge for changes the client requested.
Some clients pay by the hour rather than by quote. There, the hours are the invoice itself, so check them before they go out to the client.
And don't wait for the project to end. A project that has already used half its hours with only a third of the work done needs a conversation with the client now, not at the final invoice. In ProperTime, the manager approves reports throughout the month and sees in real time how many hours went into each project and each task, so an overrun shows up while there's still time to do something about it.
The monthly check
You don't need a complicated pricing system. Half an hour once a month is enough, after managers have approved the reports:
- Make sure the hours are complete. Every employee has reported, there are no empty days, and the hours on projects match the attendance hours. An hour that wasn't reported won't show up on any project.
- Run an hours report by project. For each open project: how many hours went in this month, and how many since the project began.
- Multiply by the hourly cost and compare with the quote.
- Flag overruns. A project that has passed its planned hours, or is approaching them faster than expected.
- Decide what to do. A conversation with the client, an extra charge for changes, splitting the work differently across the team, or a lesson for pricing the next quote.
And once a quarter, add up the hours by client. Sometimes your biggest client is not your most profitable one.
This data is useful to the team itself, too: people who see where their hours went can plan next week better.
This check is easy when all the data is already in one place. In ProperTime, attendance, absences and project hours are recorded in the same system, managers approve throughout the month, and you run hours reports by employee, client or project. At the end of the month, the same hours produce a ready-to-load file for leading payroll systems.
Received a grant from the Israel Innovation Authority? There, the hours on each project have to be reported in an approved system. ProperTime is approved for Innovation Authority hours reporting, and it was the first system approved for reporting from mobile.
And at a nonprofit (amuta), where each program is funded by a different foundation or government ministry, the same structure shows every funder how many hours went into their program.
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