Timesheet Compliance and Its Necessity in Running Your Business
Corporate governance laws, state/federal labor laws, and accounting regulations are driving organizations to increase their transparency and when reporting on project portfolio, labor and financial reporting. Regulatory and oversight bodies such as the SEC, demanding and extremely cautious audit firms and nervous shareholders, now point the finger directly at the company’s senior executives and hold them personally and criminally accountable for the company’s accurate reporting on operations and any control weaknesses.
Typically, the effort to maintain compliance in manual and siloed environments consists of 80% of the time dedicated consolidating and formatting data, and 20% of the time investigating irregularities and issue that will impact an organization’s ability to comply to internal and external regulatory requirements and industry standards. Moreover, the labor-intensive reality of compliance for businesses who “live and die” with the timesheets that drive cost, revenue and profitability have placed many organizations in a precarious position. Consequently, the automated and centralized capture of time along with workflow and auditing capabilities, have become a must-have solution for organizations to effectively protect their interests without devoting countless hours, or even worse, ignoring the problem altogether.
One of the primary advantages of automating timesheets is the ability to generate standardized reporting to mitigate potential errors and fraud scenarios. In fact, it is recommended to define a set of fraud and error detection reports that will help your organization achieve sustainable compliance for timesheet management.
The timesheet fraud and error detection reports you need:
Time Entry Reports
- Time entries that were modified (created or deleted) by one user on behalf of another user. For every time entry display both the current and previous entry, transaction time and date stamp, the username of the person who made the original time entry, as well as the modification, and any notes describing the reason for the modification
- Time entries that were modified (created or deleted) by one user on behalf of another user without providing a note explaining the reason for the change
- Time entries that were modified by a project manager. For every time entry display both the current and previous entry, as well as any notes describing the reason for the modification
- Time entries that were modified by a group manager. For every time entry display the current and previous entry, as well as any notes describing the reason for the modification
- Time entries that were modified after having been approved or after having reopened a period
- Time entries whose attributes were changed for example from payable to not payable, billable to not billable, R&D to non R&D (in that case it should also mention the “Capitalized and Funded” attributes)
- Time entries whose cost or billing rate was modified
- Timesheets that have been modified after having reopened a period
- A report on reopened timesheet periods
- Employees who have done more than X hours of overtime over the last N weeks
- Timesheets that are approved by someone other than the person that was designated to approve it
- Timesheets that are approved by general administrative staff
- Unapproved time entries in a specified date interval
- Timesheets that are approved long after they were submitted (e.g. 3 months or another specified date interval)
- List of projects that exceed time budgets
- List of projects that show a sudden jump in cost allocation
- List of users (employees or consultants) that submit timesheets with hours that far exceed their average
- List of users (employees or consultants) that submit timesheets with hours that far exceed the business units’ defined period size
- Amount of time or number of employees working on a project (or allocating time against a business unit) changed by more than X percent in comparison to the previous quarter
- List of employees that required adjustments for X% of their time entries
- Billable time entries that have not been invoiced after period closing and at the end of each quarter
How Software Can Help
The reports above would be very hard to produce if time is being tracked using spreadsheets, multiple disconnected systems, or a basic time entry system that lacks auditing and error detection capabilities. An enterprise timesheet management software must provide:
- Definition and enforcement of timesheet policies and rules; validations should be performed by the system at the point of entry
- Lock down of approved timesheets and timesheet periods
- Auditing of every time entry change and all timesheet approvals/period closing
- Notifications when budget thresholds have been reached
- Reports and live analysis dashboards to monitor projects/operations and to detect inappropriate, fraudulent, inefficient use or misallocation of time, or other potential problem areas
Without formal time tracking policies, a company is far more likely to experience material errors and delays in its payroll, billing, and cost allocation/reporting. The company may also experience budget overruns, make inaccurate estimates and forecasts that are not entirely based on facts, suffer from intermittent resource underutilization or unanticipated resource overload. Weak controls and manual processes will also force the organization to expend considerable resources in preparation for an audit. Ineffective time tracking can also result in revenue leakage, longer billing cycles, higher probability of payroll and invoicing errors, duplication of effort and extended correction cycles, project execution problems, and ultimately, a potential compliance-related audit failure.
The only way a company can ensure sustainable timesheet compliance and governance is for it to have the proper controls and auditing system in place. Company executives and audit committees must have real-time access to error and fraud detection reports. This blog provided a set of recommended timesheet error and fraud detection reports that every organization should have access to and analyze on a regular basis in order to validate that its employees are working on authorized projects and are being paid what they should be, that any consulting time charges are within the pre-defined parameters, and that costs are allocated against the right projects.
Upland PSA can automate your entire process, and put an end to frustrating errors thus allowing more room for your organization to thrive. Check out this video and see how easy it can be for your team to keep their timesheets up to date, accurate, and approved, with the Upland Mobile Timesheet app.