Best Practices for Small Business Timekeeping

Best Practices for Small Business Timekeeping

I recently had a client with an interesting problem related to timekeeping practices. If you employ non-exempt (hourly) staff, in order to calculate their pay you need to have the number of hours that they worked in a pay period. A lot of folks use the good old fashion timecard, employee codes, fingerprints, etc. This is the issue that came up that made things interesting.

My client is a small business. She has four people that work for her on an hourly basis and some salaried employees as well. Her practice had been to have employees sign in and out using a handwritten timesheet. People logged the hours on the timesheet, including start and end times for the day, lunch periods, and any paid time off or other absences from the office. This is not a horrible system, just a bit labor intensive. When it came time to process the payroll, my client had to collect the sheets, add up all the hours, make sure people had PTO available, etc. Just a lot of extra effort.

It turns out that more than one employee was fraudulently entering and then signing their timesheets. There were all kinds of bad behaviors happening, such as fellow employees signing for their coworkers, lies about clocking in and out, whether the person was absent or not.  

Obviously this is a fraudulent and rife with potential problems. One of the things that we often recommend with our employers is that if you aren’t going to have a biometric scanner (my local grocery store has a fingerprint scanner for clocking in and out), you may want to have some other mechanisms that require the entry of a particular code. There are all kinds of time keeping software platforms available online (our recommended list can be found below).

By using the online software you get to accomplish a couple of things. First, people are given a personal log-in and code for their payroll system. They log in in the morning, clock their lunch break, and log out at the end of the day. Also, any program that is integrated with QuickBooks makes accounting more streamlined. You save yourself time and energy of having to sit down and calculate time, on top of the hassle of people trying to fraudulently take advantage of your timekeeping methods.

You then require your employees to clock in and out based on your particular mechanisms and it is perfectly acceptable to do so.

The interesting question is then what do you do with the people who were messing with the system. These are offenses that can be disciplined if you have a policy that discusses timekeeping practices. You can punish both employees: the one skipping work and the one helping to falsify the time stamp. However, in order to take disciplinary action it must be stated in your employee manual. Could you fire them? You could if you’re in an at-will employment state, but the rational of harsh consequences may be best considered for a repeat offender. In this case, you have someone that is actively stealing from the company. If someone was stealing computers from the company, I’m sure you’d take action there as well.

Think about your mechanisms of tracking time and try to secure them the best way you can. If you’re using technology, you can help your employees better actively manage their time and you can make your payment processing so much easier.

If you have any questions about payroll, please contact us today.

Here are some of our recommended timekeeping programs (that all integrate with Quickbooks):