An American Editor

July 10, 2019

It’s All About the Benjamins! EditTools’ Time Tracker (Part II)

Filed under: Editorial Matters — An American Editor @ 10:17 am

By Richard Adin, Founder, An American Editor

In It’s All About the Benjamins! EditTools’ Time Tracker (Part I), I discussed the importance of collecting data. Although freelancers make decisions every day that affect their current and future incomes, most do so without adequate data or, if they have adequate data, without analyzing that data.

One reason for the lack of proper analysis is that it isn’t easy to get a quick overview of collected data. A second problem is that the data aren’t kept in an easily accessible standardized format. A third problem is it is too easy to forget to track the data. This is where EditTools 9’s Time Tracker comes into play: Time Tracker automates some of the analysis process and helps keep the data in a standardized format, along with making it easy to track the data.

Time Tracker has a lot of features, far too many to discuss in depth in an essay on An American Editor (AAE). (The Time Tracker Help file is 55 pages long. You can download the complete Time Tracker Help file in PDF format using this link.) Consequently, what you will get here is simply an overview.

But before you begin . . .

Before you begin using Time Tracker and analyzing your data, you should calculate your required Effective Hourly Rate (rEHR). If you don’t, you will have data, but that won’t be as meaningful and useful as it could be because the rEHR is the baseline value for determining what you need to charge and what you need to earn each working hour. I’ll provide a fuller discussion of how to calculate your rEHR at some other time; here I just summarize the rEHR.

The rEHR has been discussed in previous AAE essays, beginning with my 2010 essay, “Thinking About Money: What Freelancers Need to Understand” and in many subsequent essays, including my 2017 essay, “Do You Know Your Business’ Health?” Basically, the rEHR is the net (i.e., after tax) amount you need to earn each hour of work to pay all of your bills (which include food, shelter, and utilities) at a breakeven point — that is, no loss and no profit — or where 100% of revenue in becomes 100% of revenue out with all taxes paid.

Here is a quick illustration to explain the different terms: Your GROSS income for your fiscal year represents every dollar you earned BEFORE you paid anything, including self-employment taxes, to anyone, including yourself. Your NET income is the amount that is left from your gross income AFTER you have paid the required self-employment taxes (e.g., Medicare and Social Security) and either paid or set aside money to pay your quarterly withholding. So, if your gross income is expected to be $50,000 and your tax withholdings and payments (i.e., self-employment taxes and quarterly payments) combined equal $12,500, your NET income is $37,500.

That net income, however, only represents your actual income after taxes; it is not your rEHR. Your rEHR is the total of all costs for you to live and do business that are paid out of NET income divided by the number of billable hours you work. That some of these expenses may later be a deduction when you calculate your tax return is irrelevant; you still have to pay the expense from NET income.

The rEHR is important to know because it is the baseline against which you need to measure your GROSS and NET incomes. If your rEHR equals $40,000, but your NET income equals $37,500, you are not earning enough to breakeven. Conversely, if your rEHR equals $30,000, but your NET income equals $37,500, you are earning a decent profit. Whether you are earning too little, just enough, or making a profit affects your EHR. (I realize that I am mixing hourly [rEHR] and yearly [gross and net income] numbers, but you have to expand the rEHR to a yearly equivalent so that it can be compared against gross and net income.)

As I said earlier, this will be discussed more fully in a future essay. Now, let’s turn to Time Tracker.

Accessing Time Tracker

You access Time Tracker via the EditTools Ribbon, as shown here:

The Time Tracker icon

Time Tracker acts, among other things, as a timer, document backer upper, and data driver. Each of these roles is controlled and accessed through the Ribbon, beginning with the Off “button.” Clicking the Off button brings up the main Time Tracker dialog — the Time Tracker Project Summary:

Time Tracker Project Summary

The Project Summary dialog is the main control “room” for Time Tracker. Here is where all your projects are listed, until they are completed and removed from the active projects window. A completed project can be removed from the active projects window and saved (just not visible on this Project Summary dialog) or removed and deleted (this is not advised unless you don’t need to keep any of its data). This is also where you access the dialog for new projects. When you start your workday, this is where you select which project to activate for your work session.

Also notice the displayed summaries of project data. In the below image, the boxed material labeled #1 contains the project name and the identifiers of any subparts. In the example, the project is the “Giant Peaches of McCandy Province.”

Note that the project, as of today, has two subparts. Subparts generally represent billing groups. A client with a large project that is expected to last several months, for example, may want edited material submitted in batches, and a subpart can represent each batch — a way to track what has been done and what has been earned. Subparts are created as needed. As with everything in the Project Summary, subpart data, including the subpart name, are editable.

A closer look

The boxed material labeled #2 contains changing pieces of financial project data. At a glance, you can see the number of pages you have edited, how much you have earned, your EHR for the individual project, the average number of pages you are editing per hour (APH), the project’s status, and how you are calculating the fee (project, per page, per word, per character, or hourly).

The arrows labeled #3 above show the correlation between the project/subpart (#1) and the data (#2). The top arrow links the project as a project to the cumulative data, while the bottom two arrows correlate each subpart with its own data. For the “Giant Peaches” project, to date a total of 9 hours and 36 minutes has been spent editing, amounting to a total of 127 pages for which $635 has been earned. The overall EHR for the Giant Peaches project is $66.15 and an average of 13.23 pages have been edited each hour. The project is still open and the client is being charged a project fee.

The next two data lines (aligned with the bottom two arrows) show the breakdown of the cumulative data. For example, “Chapters 1-5,” the first subpart, was 66 pages and took 5 hours and 31 minutes to complete. The subpart accounted for $330 of the total earnings to date. For that subpart, the EHR was $59.80 and the APH was 11.96. Although the status is marked as Open, if the client has been billed for that subpart, it could be marked as Completed. Changing a subpart’s status to Completed does not affect the status of any other subpart or of the project. However, marking the main project line (the Giant Peaches line in this example) as Complete would affect all of the subparts.

As the image above shows, you can readily see how you are doing on an individual project basis. But that is not enough information. Although you may be doing very well so far on this project, what you need to know is how well you are doing over all of your projects. For that quick overview, look to the bottom of the Project Summary (see image below), where you see your EHR and APH data for the year to date (YTD) and over all of the projects you have tracked over the years (Lifetime).

The cumulative EHR and APH data

As noted earlier, the Giant Peaches EHR is $66.15 and APH is 13.23. But Giant Peaches is only one project that has been worked on since January 1 (the YTD data is calculated on a calendar-year basis) and, eventually, only one of many projects over multiple years (Lifetime data include every project in the Time Tracker dataset; in this instance, the first Time Tracker project was this calendar year, so the YTD and Lifetime numbers are the same). As the image above illustrates, over all of the projects worked on to date (project status does not affect inclusion or exclusion from the cumulative data; the cumulative data reflect all projects in the dataset, whether open or completed, but does not include data from deleted projects), the YTD and Lifetime EHRs are $46.89 and APHs are 13.13.

The data summarized here should be compared to the rEHR to determine how well the business is doing. If compared to the “going rate” numbers that float around chat lists, which usually range between $15 and $30 per hour, the business is doing quite well. Alas, the “going rate” numbers are not really helpful, even though most of us do like to compare what we are “charging” to what our colleagues are “charging.”

One last thing before we end Part II

If you charge only by the hour and charge, for example, $25 an hour, your EHR will always equal $25, unless you account for those hours spent working on a project that you cannot charge to the client. There are several ways to do so using Time Tracker. One way is to always use a subpart. The first subpart would be for all billable hours; then, if you run into overtime at your expense, create a second subpart for those data and set the fee for that subpart at $0 per hour. A second method (and one I like better) is to change the fee for the project from per hour to per project and enter the total amount you can bill the client as the project fee. Then you can keep timing and, as the hours increase but the fee does not, the EHR will decline.

Next

In Part III, we will create a new project using the Create/Update Project dialog, which is where we enter all of the “permanent” information about a project.

Richard (Rich) Adin is the founder of the An American Editor blog, author of The Business of Editing, owner of wordsnSync, and creator/owner of EditTools.

Advertisements

Blog at WordPress.com.

%d bloggers like this: