“The project shows a 12% margin, but 80 hours were logged three weeks late.” You will hear some version of this sentence in many month-end close meetings (the example is illustrative), and it sums up the problem: in a professional services firm, an engineering consultancy or an ERP integrator, project margin is only ever as reliable as the time entries behind it. And those entries are made by consultants whose job is not filling in spreadsheets.
This practical guide is for CFOs and operations directors at organisations with 50 to 500 employees. It explains how to configure timesheets in your ERP, from time entry through billing to project cost. It does not cover attendance tracking: for clocking in and payroll, see our time and attendance and payroll guide.
Why Time Entry Is the Weak Link in Project Profitability
A timesheet feeds three financial decisions at once: what you bill (time and materials), what you know about remaining work (fixed price) and what a project really costs (cost accounting). A single entry error therefore travels through the whole chain.
Three failures show up almost every time:
- Late entry: hours are reconstructed from memory at month-end. They are approximate, rounded, and often assigned to the last project the consultant remembers.
- Incomplete entry: non-billable hours (pre-sales, training, bench time) are not logged, so utilisation is wrong and project costs are understated.
- Missing approval: time that is logged but not approved at close is not billed. It is revenue earned but not invoiced, sometimes rolled from one month to the next without anyone noticing.
What they have in common: the problem is rarely the tool and almost always the process and the user experience. A well-configured ERP makes the problem visible, but it will not fix it on its own.
The Target Flow: From Logged Time to Payroll and Re-Billing
The reference flow has five steps, whatever the vendor (Odoo Timesheets, Dynamics 365 Project Operations, SAP PS/CATS, Sage, Cegid or a connected PSA):
- Entry: the employee records hours against a project, a task and an activity code.
- Approval: the project manager approves the allocation and the line manager approves total hours. Only approved time becomes “locked”.
- Billing: on time and materials contracts, approved time feeds the invoice at the contract rate. On fixed-price contracts, it feeds progress tracking and the estimate to complete.
- Cost accounting: each hour valued at the employee’s cost rate creates a cost entry on the project, which gives you the project cost.
- Payroll and re-billing: approved hours can feed payroll (bonuses, on-call pay) and intercompany or customer re-billing.
The design principle: enter once, use many times. If cost accounting, billing and resource planning are fed by different files, you end up with three versions of the truth. For the accounting mechanics that follow (WBS, progress, revenue recognition), see our guide to project accounting in the ERP.
Configuration: Activity Codes, Rates, Projects and Granularity
Activity Codes
Keep to a short, stable list. A scheme that works well:
- Billable: consulting, development, customer training, acceptance testing.
- Non-billable, project-related: internal project management, technical debt, pre-sales tied to a deal.
- Non-billable, overhead: general pre-sales, internal training, bench time, administration.
- Absences: leave, sickness, public holidays, fed from the HR module rather than re-entered.
Beyond about ten codes, data quality degrades: people pick at random, and so do your metrics.
Billing Rates and Cost Rates
You need two rates, which serve different calculations:
- The billing rate (by role, by contract, sometimes by customer) drives time and materials invoicing and work-in-progress valuation.
- The cost rate (loaded salary, allocated overhead, sometimes subcontracting) drives project cost.
Do not expose individual cost rates to project managers: use a cost rate per grade or role, updated every year. It is enough to manage margin and avoids pay confidentiality issues.
Projects, Tasks and Granularity
The project > phase > task structure should mirror what you bill or manage, and no more. Every extra level adds clicks. On granularity, the choice between days and hours depends on the model:
| Model | Recommended granularity | Why |
|---|---|---|
| Daily-rate time and materials | Half-day or day | Billed by the day, fast entry |
| Hourly time and materials, support | Hour or quarter-hour | Service commitments, tickets |
| Fixed price, engineering firm | Hour | Track consumption by work package and phase |
| ERP integrator | Hour (or 0.25 day) | Compare actuals with estimate to complete per task |
Approval and Controls: Cut-Off, Reminders and Reconciliation
An approval process without calendar rules turns into a queue. Four mechanisms are enough:
- A clear monthly cut-off: for example, entry locked two working days after month-end, then the period is closed. Any later correction goes through a tracked request.
- Automatic reminders: a Friday notification for incomplete weeks, escalation to the manager the next day, then to the office or practice head. The native workflows of most ERPs can do this.
- Reconciliation with schedules and leave: a week logged at 28 hours when the employee had no leave or absence is an anomaly to investigate, just as a total above the legal working-time limit is.
- A variance check against staffing: comparing actual with planned hours per project reveals overruns before the invoice, not after.
The golden rule for the close: unapproved time at close is unbilled revenue. Include in your close checklist a report of logged-but-unapproved time and of missing time per employee. For the wider close logic, see also our guide to the continuous close.
Special Cases
Fixed Price and Progress: Time Spent vs. Estimate to Complete
On fixed-price work, time is not billed, it feeds progress. Two pieces of information must coexist in the timesheet or on the task: actuals (what the time entries say) and the estimate to complete (the project manager’s forecast). Progress is calculated from both values, not from actuals alone: a project can have consumed 80% of its budget and be only 60% complete, which signals a loss at completion that needs to be provisioned.
Update the estimate to complete at the pace of progress billing, at least once a month. For the engineering firm angle, read ERP for engineering and consulting firms.
Subcontractors and Non-Billable Time
Subcontractors do not always fill in the ERP timesheet, but their cost must reach the project. Three common practices: entry by an internal contact, import of the supplier’s activity statements, or a supplier portal. In every case, reconcile the statement with the purchase order before approving the supplier invoice.
Non-billable time is not noise: it measures your billable utilisation and your overhead cost. Removing it from time entry means steering blind.
R&D Capitalisation and Research Tax Credits
If you develop a product or carry out work eligible for R&D tax relief, the timesheet becomes evidence. You must be able to isolate research staff hours, by project and by period, with an approval trail. A dedicated “eligible R&D” activity code linked to the project is enough to secure the claim and, in the accounts, to document any capitalisation of development costs. The exact eligibility parameters depend on your jurisdiction and should be validated with your tax adviser. In France, the justification rules are detailed in our article on ERP and the research tax credit (CIR) (in French).
Time Entry UX: The Real Reasons People Don’t Log Their Time
Employees do not skip time entry out of carelessness, but because the cost of entering time exceeds the benefit they perceive. The real causes:
- A slow interface, or one designed for control rather than use.
- Too many projects and codes to scroll through to find the right line.
- No feedback: employees never see what their data is used for.
- Fear of surveillance: if time entry is used to assess the individual rather than the project, it will be embellished.
The levers that work:
- Mobile: 30-second entry from a phone, including offline.
- Pre-filling: favourite projects, copying the previous week, suggestions from the calendar or tickets.
- Short daily entry rather than a long weekly one: a reminder is more reliable than memory.
- Transparency: show employees the margin of their projects and how the data is used.
- Leading by example: managers log on time, or nobody will.
KPIs to Track
Four indicators are enough to manage time entry and profitability:
| KPI | Definition | What it tells you |
|---|---|---|
| Utilisation rate | Productive hours logged / available capacity | Real workload of the teams |
| Billable ratio | Billable hours / hours logged | Share of time that generates revenue |
| Project margin | (Revenue - project cost) / revenue | Real profitability of the engagement |
| Time-entry lag | Average gap between day worked and day logged | Reliability of the data |
Target thresholds vary by business and size. Rather than copying an external benchmark, measure your own history over 12 months and set progressive targets. Time-entry lag is often the best leading indicator: if it worsens, the margin you publish will no longer be reliable next month.
Deployment Checklist and 5 Common Mistakes
Checklist
- Define the list of activity codes (fewer than ten) and the allocation rules in writing.
- Separate billing rates and cost rates, by role and by year.
- Align the project structure with billing (time and materials, fixed price, progress).
- Connect leave and schedules to avoid re-keying.
- Set the cut-off, the reminders and the approvers.
- Enable mobile entry and pre-filling.
- Build the dashboard for the four KPIs before go-live.
- Run the first close in parallel (old and new process).
The 5 Common Mistakes
- Too much granularity: hundreds of tasks nobody understands.
- No cut-off: time arrives when it arrives, and the margin changes with every correction.
- A single cost rate for all roles, which hides projects overstaffed with seniors.
- Separating time entry from billing: the invoice is prepared in a spreadsheet from exported hours.
- Not using the data: if nobody looks at the indicators, time entry becomes a chore again.
Going Further
If your business relies on a dedicated service-management tool, read the PSA comparison for MSPs and our guide to ERP for service companies (in French). To assess your vendor on project time management, download our ERP evaluation scorecard: 100 points to benchmark three solutions side by side.
