Page 60 - Essentials of Payroll: Management and Accounting

Accumulating T ime W orked
range of $10,000 to $250,000, and requires a large number of dumb
terminals that cost at least $500 each.What is the reason for incurring
this expense? This system enables a company to track the time worked
on specific jobs.This is a very important capability when customers are

charged based on the specific number of hours that employees work on
their projects, especially when the customer has a right to investigate the
underlying hourly records and to protest billings that do not match these
detailed records. This is a particularly important issue for government
work,where cost-plus contracts are still common,and the government has
a right to closely review all supporting labor records. It may also be a
major concern for any organization for which the cost of direct labor

is still a relatively large proportion of total costs; otherwise, managers
would have no valid information about how a large proportion of com-
pany costs are being incurred. Nonetheless, the data entry system
required to support the collection of this information is very expensive,
so you should conduct a cost-benefit analysis to see if the value of the
supporting information is worth the cost of the system.
It is also possible to have employees manually track the time they
charge to each job on which they are working.Though this option may
seem much less expensive than the use of the data entry terminals

described, this approach is not recommended unless the number of
employees using it is very small. The reason is that the level of data
errors will be extremely high, given the large number of jobs to which
labor is charged each day (the time charged to a job may be wrong, as
well as the job number to which the time is charged).As a result,the cost
of the administration time required to track down and correct these
problems will greatly exceed the cost of installing an automated time-

tracking system; this correction cost will be so high for a large facility
that the comparable cost of an automated system will be far lower.
A final timekeeping system to mention, one that is not frequently
used, involves backflushing. In fact, this is not a real timekeeping system

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