What is time tracking? A practical guide for small business owners

Not too long ago, clocking in for work involved physically being on-premise and stamping your paper time card. While it may be hard to imagine now, analog time tracking was the standard practice for several decades. 

Fortunately, we’ve progressed a long way since then. But with the turn to digital and automatic time tracking, you might be left wondering “Wait a minute…  what is time tracking anyway?” If that’s the case, don’t worry: we’ve got you. 

In this comprehensive guide, we’ll explore the evolution of time tracking, its benefits for small businesses, and how time tracking software can help you effectively manage your team. We’ll also highlight several must-have features before revealing our top time tracking choice for hourly teams. So, as Johnny Cash would say: let’s go, time’s a wastin!

What is time tracking? 

Time tracking, sometimes called timekeeping or time logging, is a powerful tool that businesses use to record employee working hours and monitor productivity.

When it comes to businesses with hourly employees, time tracking is particularly important. It provides insights into how much time your employees dedicate to specific tasks and projects. With these insights in mind, you can make adjustments to improve productivity, streamline processes, and ultimately run a more profitable business.

The evolution of time tracking 

So, how did time tracking become the norm for tracking the attendance of hourly employees in America? Well, to tell that story we have to travel back to 1888 when William L. Bundy revolutionized the way we manage time with his remarkable invention of the time clock. Before his invention, time tracking relied on honor-based systems or manual logs. As you can imagine, these methods were a bit unreliable, but Bundy’s time clock changed all that. 


With an integrated card slot and innovative printing mechanism, employees could insert their personal time cards and accurately record their working hours for the first time ever. His invention rapidly gained traction across various industries, and ushered in a transformative era in time tracking practices.


While Bundy’s time clock remained relatively unchanged for decades, by the 1970s, the analog components were replaced by electronic counterparts and digital displays. But progress was far from over. Just a few years later, a groundbreaking milestone was achieved with the introduction of the first commercial biometric time clock

This revolutionary device took employee attendance to a whole new level by scanning and recording the unique geometry of their hands. Although it would take decades for biometric time tracking to become a common practice, its mere existence set the stage for a new era of efficient and accurate time tracking.

1980s – 1990s:

By the late 1980s, computers had effectively transformed the way Americans conducted business. And as the late 20th century approached, the invention of the Internet paved the way for the widespread adoption of computerized systems and software-based solutions. During this time, forward-thinking companies embraced cutting-edge software solutions that automated calculations and streamlined payroll processes. These technological advancements marked a significant shift towards more efficient and tailored time tracking solutions.

Early 2000s – present day:

Fast forward to the early 2000s. We saw a new era of time tracking solutions emerge with the advent of mobile and cloud-based technologies. This groundbreaking development empowered employees to track their working hours conveniently through mobile apps or web platforms. Not only did these solutions offer flexibility and accessibility, but they also introduced additional functionalities that would transform how businesses monitored employee efficiency. 

As geolocation tracking grew in popularity, it quickly became an indispensable tool for tracking employee locations in real time. This opened up new avenues for efficient monitoring, streamlined management practices, and ultimately made it possible to remotely manage a geographically-dispersed team.

Little did anyone know that by 2020 a global pandemic would force millions of businesses to close their doors. The result was a new era of remote work, made possible by the latest time tracking and employee monitoring technology.  

The benefits of time tracking

Whether you’re a seasoned manager or owner, or just starting out, implementing an accurate and reliable time tracking system can revolutionize the way your business operates. Improve productivity and project management to ensure accurate payroll and optimize operational efficiency. Essentially, the benefits of an effective time tracking system can’t be overstated. So, let’s explore these benefits in detail to uncover just how transformational they could be for your small business.

1. Accurate time tracking and payroll

As you can imagine, it’s difficult to ensure fair and accurate payroll calculations without a precise time tracking method. For teams with hourly employees, this is an important obstacle to overcome. Afterall, your team’s wages are directly tied to the hours that they work. By allowing your employees to clock in and out in real time, time tracking software promotes more accurate time keeping. Geo-tracking technology takes time tracking accuracy to the next level by ensuring your team is on-site before they clock in for their shift.

With an accurate time tracking system in place, you can precisely calculate wages (including overtime and bonuses), minimize errors, and ensure compliance with labor laws.

2. Increased productivity

Imagine how useful it would be to know exactly how many hours it takes your team to perform certain tasks, like product inventory or safety protocols. Time tracking allows you to do just that. By gaining visibility into employee time allocation, businesses can identify operational bottlenecks and compare the individual productivity levels of their employees. With this information, you can empower your employees to better manage their time, prioritize tasks effectively, and optimize time-consuming activities. By reducing things like idle time, you can hope to see increased productivity and improved overall performance.

3. Improved project management

Along the same lines, time tracking data provides the insights required to improve project management. By obtaining a clearer picture of time allocation across different projects, project managers can make more precise timeline estimates, adjust plans as needed, and allocate resources more effectively. Not only will this lead to higher customer satisfaction, but it also creates an opportunity to take on more projects and ultimately increase your profits. 

4. Data-backed business decisions

As you gain more knowledge about your business operations, your decisions will become more impactful. With insights into employee work patterns, resource allocation, project profitability, and overall productivity, time tracking software provides this knowledge in spades. With this information, you can easily identify areas of improvement, streamline processes, and make data-driven decisions that propel your business to the next level.

What is time tracking software?

Time tracking software is a digital tool that businesses use to monitor and record how their employees spend their time. While the most basic time tracking solutions enable employees to digitally clock in and out for their shifts, more advanced applications use the data to provide valuable productivity and time management insights.

 Here are a few different methods small businesses use to track their employees’ time.

  • Manual recording: This simple form of time tracking requires employees to manually input their start and end times using a traditional employee punch card or time tracking spreadsheet.
  • Timer systems: Employees essentially use timer systems as a stopwatch to track the duration of activities or tasks. This can be in the form of a mobile app or more advanced time tracking software.
  • Proximity-based: With this time tracking method, employees use swipe cards or employee badges to record their arrival and departure at their place of work. While this option works well for on-premise employees, it’s not a functional solution for businesses with mobile employees.
  • Time clock app: Time clock apps allow employees to track their hours, breaks, and overtime from their computer, mobile device, or POS system. Most time clock applications use this data to automatically create weekly timesheets for payroll purposes.
  • GPS time tracking: With GPS time tracking geofence technology, businesses can create a permanent location (such as a restaurant) or temporary job site. This ensures your team has reached their place of work before clocking in.

How to effectively track your employees’ time

Whether you’re using manual time tracking methods or advanced software, adopting the following best practices will help you maximize productivity, streamline operations, and maintain accurate records. By staying mindful of these key practices, you can optimize your time tracking process and enhance overall efficiency within your team.

Establish clear guidelines

To ensure all your employees record their hours in line with company policy, it’s important to establish clear time tracking guidelines. For instance, you may need to clarify whether or not your employees can include their commute as part of their work hours. Or, you might need to establish strict overtime restrictions to manage labor costs. Be sure to communicate the guidelines clearly and answer any questions your team may have along the way.

Create a uniform approach

It’s equally important to create a consistent method for your employees to record their hours. By creating a uniform approach, you ensure that all time entries are accurately and consistently documented. Whether it’s using a shared spreadsheet, a standardized template, or a dedicated time tracking tool, providing a standardized method for recording hours will promote efficiency, transparency, and fair practices across your team.

Educate your team on the importance of accurate time tracking

To foster employee compliance, educate your team about the significance of time tracking beyond simply logging their work hours. Help them understand how time tracking plays a pivotal role in managing project timelines and optimizing resource allocation. 

Provide training 

Hold a comprehensive training session that shows your employees the step-by-step time tracking process to ensure accurate tracking and streamline the adoption process.

Monitor in real time 

Rather than having your employees record their hours at the end of the day or week, encourage them to track their hours in real time. This reduces the chances of inaccurately recalling work hours and provides more accurate data. A great way to start this process is to use a versatile system like Homebase that automatically tracks things in real time, making it easy for your team.

Break down tasks

Encourage your employees to break down their work tasks into smaller, more detailed subtasks. By doing so, you’ll obtain more detailed descriptions of their work activities and gain valuable insights into your team’s time allocation.

Routinely review and validate

To ensure accuracy and consistency, review and validate employee time records regularly. Depending on your time tracking process, this may require cross-referencing time entries with project schedules or team collaboration tools.

Provide feedback

Regularly reviewing employee time tracking records will help you identify any discrepancies or errors. By sharing these findings with your employees, you can prevent the same errors from happening in the future and improve the accuracy of your records.

Continuously evaluate and improve 

Embracing a mindset of continuous improvement is the key to success. Analyze data and gather feedback from your employees. This helps you uncover valuable insights that will guide you in refining the time tracking process. This may involve streamlining workflows, tackling inefficiencies head-on, or even incorporating automation to simplify things. Remember, it’s all about creating a seamless and user-friendly experience for everyone involved.

What to look for in time tracking software

There’s no shortage of time tracking options out there, but not every software solution designs with hourly employees in mind. Before you make any decisions for your hourly-based team, make sure the time tracking software you’re considering has the following must-have features. 

1. Time clock and automated timesheets 

On the most basic level, your time tracking software should allow your team to easily clock in and out directly in the application. But nobody wants to be basic. To improve time tracking and payroll accuracy your software should also have the ability to automatically create timesheets for payroll use.

2. Mobile application and remote access

While mobile applications and remote access are critical for businesses operating across multiple locations, they can also be a useful feature for brick-and-mortar locations. Not only do mobile time tracking applications prevent buddy punching, but they eliminate the disturbances of system updates. Since all updates happen right in the app, you don’t have to worry about having a repair technician come in to service a physical time clock or POS system.

3. Built-in labor compliance capabilities

The benefits of time tracking software should extend beyond the simple act of tracking employee time. Built-in compliance features ensure your company remains compliant with labor regulations and company policies by automatically calculating employee overtime. Don’t want your employees to have the ability to work overtime without prior approval? That’s not a problem either. Compliance features will notify you when members of your team are approaching overtime, so you can avoid paying overtime wages altogether.

4. Advanced reporting

To optimize operational performance at every level, you’ll need a time tracking solution that can create reports based on employee analytics. This feature will provide valuable insights into employee performance, productivity, and labor costs. All that allows you to manage your team and business more efficiently.

5. Payroll integrations

Unfortunately, time tracking solutions that aren’t able to integrate with your existing payroll system (or don’t have a built-in one) can be incredibly time consuming. Choose an option with payroll integration. It can help you reduce time spent on administrative tasks, minimize errors, and streamline your entire payroll process.

The best time tracking tool for hourly teams

Managing a team of employees working various shifts (sometimes across locations) can sometimes feel like a never-ending game of Tetris. But it doesn’t need to be that way. Homebase’s free time clock app was created with hourly teams in mind. Now, you can easily keep track of your employee’s time without sacrificing your own. 

With Homebase’s app, all your team needs is their mobile device to record their hours and breaks. So even if part of your team works remotely or across work sites, they’ll be able to keep track of their time on the go. 

Believe it or not, Homebase even makes payroll painless by seamlessly integrating with your existing payroll process. Don’t have one you love? No problem. Homebase’s award-winning payroll software allows you to instantly convert automated timesheets into hours and wages. Plus, you can calculate relevant taxes, and send accurate payments. No headaches or hair-pulling required.

With Homebase, you can also set up specific break and overtime rules, store timecards (to comply with FLSA record-keeping). Plus, receive notifications when federal labor laws change, eliminating the mental load of labor regulation compliance.

You already know the responsibilities of small business owners are endless. After all, there are only so many hours in the day to get things done. And although it’s important to delegate tasks where possible, it’s understandable that you’d want to keep tabs on employee productivity and payroll. With Homebase cut the amount of time you spend on payroll by 75% — so you can do it all, without actually having to do it all.

A free time tracking app that frees up your time. 

Track hours. Prep for payroll. Control labor costs. All with our free time clock. Try Homebase time clock

Time tracking FAQs 

What is time tracking? 

Time tracking is a powerful tool that businesses use to record employee hours and monitor productivity. Popular methods include spreadsheets, timer-based applications, physical swipe card systems, or digital time tracking software like mobile applications.

What are the benefits of employee time tracking?

Employee time tracking provides many benefits, including increased accuracy in time tracking and payroll processes. However, modern time tracking software goes beyond these basic functionalities. By analyzing employee data, businesses can identify areas of inefficiency, enhance productivity, improve project management, and optimize their operations for better outcomes.

Why should you use time tracking software for your small business?

Time tracking software is a valuable tool for small businesses. Businesses with hourly employees love that it simplifies the time tracking and payroll process. With the right software solution, small businesses can more accurately monitor and record their teams’ hours, improve payroll accuracy, and streamline invoicing. Time tracking software can also help small businesses identify inefficiencies. Avoid things like productivity bottlenecks, allowing for more efficient resource allocation and enhanced operational efficiency.

Related posts

Employee time clock: Your guide to time tracking

An employee time clock can be so much more than just a way to punch in and punch out. With…

Read article

5 essential time clock rules for hourly employees

Managing employee hours, payroll, and compliance with state and local regulators are crucial aspects of any small business. If hours…

Read article

6 reasons your business needs an employee time clock app

Keeping track of employee hours worked and payroll is an important part of any business. Additionally, employers must comply with…

Read article

How software for gym management can help you run your gym

Gym ownership can be a bit of a beast. There’s a lot to consider beyond just a love of fitness….

Read article

12 types of work schedules: which is best for your small businesses?

As small businesses adapt and evolve to the shifting conditions of the world around them, so too do staff work…

Read article

Employee moonlighting: Tips for managing employees with multiple jobs

Employee moonlighting sounds as if it involves jumping into a phone booth and putting on a cape to save the…

Read article
Effortlessly schedule and track your team's time with Homebase.
Try our basic plan free, forever.
Try Homebase for free