LMN Blog

Incentive Systems for Landscape Foremen (Goals + Bonuses)

Create Incentive Systems for Your Landscape Foreman Using Clear Goals and Metrics.

 

Last month we looked at how to set goals for sales + design staff.  Using their rewards as the foundation for their sales goals, the sales goal, and why we need it hit, is crystal clear for both parties.  You need your staff to hit a certain sales goal to be worth the wages you pay them.  Good people want to work for a company that can afford them opportunities for success.   With a clear sales goal, their success is your success, and vice versa.

But selling the work is the easy part.  It’s getting these jobs done on time, on budget, with as little warranty, fixes and re-work as possible that’s the hard part.  Right now, 95% of your peers, and your competitors, pay staff by time and that’s the end of the story.  The more hours staff work, the more they get paid.  But most staff have little, if any, idea, what they’re actually worth and how much work they should be completing.  Even worse, neither do most owners.

 

Goal-Setting for Foremen and Field Staff

Setting productivity goals and incentive systems for landscape foremen and field staff won’t take much more time or effort than it did for your sales staff.  In fact, it might even be easier.

It’s important to remember that different types of work have different levels of goals.  A landscape maintenance foreman can’t drive the same annual revenue as a landscape construction/install foreman.  The install foreman will have the value of materials padding their sales revenues, while the maintenance foreman is limited, in most cases, to just labor hours + equipment charges.  If your business performs different types of work (construction, maintenance, irrigation) each type of work should have its own benchmark for goals.

Step One:  Establish Your Sales/Production Target (by division)

If its your first time through this process, the easiest way to set realistic goals is by using last year’s numbers.  Start with your sales, by division.   It’s safe to leave snow revenue completely out of this process, as snow revenue is primarily dictated by weather.

Division

Last Year’s Sales

Design-Build

1,000,000

Maintenance

$500,000

 

Now add one more piece of data.  Add up the total wages paid to field staff (don’t count office/overhead staff here! – only include the wages of staff who actually work on jobs).   If you had some guys who bounced back and forth between divisions, do your best to guesstimate how much time they spent in each division and divide their wage accordingly across both.  Don’t let the fact that you don’t have these numbers separated to-the-penny stop you from you from reaping the benefits of this process.

Once you have the total field staff wages for each division, divide the costs of labor by the sales to arrive at the ratio of wages to sales for each division.

Division

Last Year’s Sales

Last Year’s Field Payroll

Field Wage Ratio

Design-Build

$1,000,000

$240,000

24%

Maintenance

$500,000

$175,000

32%

 

Your numbers may differ than the ones above, but those are typical numbers for both those divisions.  (Note: maintenance ratios can differ significantly depending on how much enhancement work is included in maintenance revenue figures)

Now review your profitability last year.   Were you happy with your profits?  If so, those ratios from last year will likely serve your company well again.  If you weren’t very profitable, you should either increase your sales goal, or reduce what you spend on wages to help improve your bottom line.

The owner of our sample company didn’t make much profit last year, and he’s got some changes in mind as well.

  • He has the opportunity to hire a more skilled (and more expensive) foreman to replace a foreman who is not coming back
  • He’d also like to give another construction foreman a raise
  • He doesn’t think he can sell any more maintenance work, so he reduces his payroll costs by $15K with the intention of getting the same work done more efficiently, with one less summer student.

His goals now appear below:

Division

Forecast Sales Goal

Forecast Payroll

Field Wage Ratio

Design-Build

$1,181,000

$260,000

22%

Maintenance

$500,000

$160,000

32%

 

Step Two:  Make the Company Goals About the Individual

With his labor ratios in place, our fictional owner calls that new, more expensive, construction foreman in for his hiring interview.   He’s experienced, he’s worked for a few other good companies, but he insists he needs to make $50K/yr to take the job.

Is $50K too much?  Is it too little?  Can we afford it?  All these questions can be answered easily using those ratios you calculated above.

First, we’ll do our best to estimate the total annual wages for the new foreman’s crew.  The foreman will be running a 3 man crew for most of the year, but will probably have a fourth guy for some occasional larger jobs.   We estimate his crew’s annual wages below:

Position

Estimated Hrs

Hourly Wage

Expected Annual Pay

Foreman

2,000

$25.00

$50,000

Lead Hand

1,800

$18.00

$32,400

Laborer

1,700

$15.00

$25,500

Estimated Annual Payroll for Crew

$107,900

 

Their ‘production’ goal is now simple.  Just divide their wages, by your division’s target labor ratio.  The foreman’s production goal is:  $107,900 divided by .22 = $490,454.

To be worth $50K a year, this foreman and his crew needs to complete $490,000 worth of landscape construction projects this year.   In just a few minutes, we’ve created a clear, measureable production goal for the foreman, that relates directly to what he wants to earn.  If he fails to hit his goal, or come reasonably close to it, the company can’t afford to pay him the wages he’s looking for.

Step Three:  Measure and Track Progress

Don’t make the mistake of setting this goal, then never mentioning it again until the end of the year.  That’s not going to help him hit the goal, and if he doesn’t hit the goal, you won’t make your profit!!!  You all need to stay on top of where you’re at and where you’re trending.    You can track your progress with a simple spreadsheet.

All you need to do is assign each invoice (or split it up by line item, if it’s a big job) to the foreman that completed the job.

Invoice #

Line Item

Amount

Foreman

1159

All

$6,500

Greg

1160

Patio

$4,100

Pedro

1160

Planting

$6,200

Kate

1164

All

$12,200

Kate

1168

All

$8,100

Pedro

 

It really can’t get much easier than that.  Take an hour at the end of each month to allocate each invoice (or line item) to your foremen, then you can total how much invoiced revenue (production) each foreman has completed.  It works for construction or maintenance and now you can monitor progress (and results at the end of the year) using real numbers instead of emotions and feelings.  If your foremen want to make more money, all they need to do is help you make more money, and when you’re both making more money, you’re both happy.

 

Step Four:  Reward Productivity.  Improve Problems.

The final step to the process is rewarding those who beat/exceed their goals.  It’s important to remember that, if everything else remains a constant, your company is wildly profitable on all work done above and beyond “the goal”.  Consider the foreman in the example above.  Their goal was $490,000 in production.

By eliminating mistakes, forgotten tools, rework, poorly managed materials, better productivity on the job, and more, let’s assume this same crew beats their production goal by a few thousand.  By saving hours, they can more work accomplished, faster.  When each job takes 10% less time, you end up with 10% more time at the end of the year to squeeze in a few extra jobs.  We’re not suggesting we need to work a bunch of overtime.  More productivity = more capacity for sales/production.  Let’s assume this crew completes $520,000 by the end of the year.

Your profitability on this extra work is superb.  If they can do more work in the same time, they really have’t increased labor costs/payroll.  They’ve just got more done in those hours.  Equipment costs are basically the same.  Fuel may increase (slightly), but leases, insurance, licensing etc. all remain about the same.  Subs and overhead costs are unaffected by this extra production.  In fact, you could argue that your only expenses on this extra work are materials.  For most install companies, that leaves you with a net profit margin of between 60% and 75% on this extra work.

Which also means, you should be ecstatic to cut some bonuses for those crews who make it happen for you.  You could bonus them 10% of every dollar over and above their sales goal.  Or, you could give them what they should have earned in wages on production exceeding their goal (at 22% labor ratio, that’s $30,000 x .22 = $6,600).  Either way, with an opportunity to earn between $3,000 and $6,600 in a bonus at the end of the year, your foremen have plenty to get motivated about.

Often the question comes up  ‘Don’t you worry about rushed work and lots of warranty problems?”  There’s a simple fix for that.  Insist that foremen repair their own warranty jobs.  That way, the foreman + crew will go crazy if they have to go back to fix things.  While they are fixing deficiencies in their work, their payroll costs are rising, while their sales/production goals are staying the same!  Every hour worked on warranty work makes it that much harder to hit their end of year bonus goal.

www.golmn.com is estimating, scheduling, and timetracking software built specifically for landscape contractors.   Let us show you how simple it can be to take the guesswork out of running a profitable landscape company.

 

 

How Much Should My Landscape Designer or Salesperson Sell?

How to set profitable sales goals for landscape designers or landscape sales staff.

Profit isn’t everything when it comes to running a business, but if your business isn’t making consistent profit then over time, your passion will give way to frustration.

As a very small business – just you and a few helpers – it’s easier to stay on top of everything. You know how much your jobs sold for and you have a good idea of how much time you can afford to spend before you need to move on to the next one. But as your business grows in size, and staff, more and more owners lose touch with that connection to field results. Staff are paid hourly or salary and not by company success. Most staff have no idea what they should be selling or producing to justify their wage. They just put their head down and go to work. There’s little incentive to work harder, and there are very few quantifiable goals to work towards.

If you want better staff, that has to change. Working without clear goals is like teaching someone to play the piano with earplugs in their ears! They hear muffled sounds, but they’re never going to be any good. They can’t hear what the music should sound like, and they can’t hear whether their playing is in tune.

Goal-Setting for Sales/Design Staff

In a recent visit to a friend’s company, there was a disconnect between what the owner believed his sales staff needed to sell, and what his sales staff believed was realistic (and even possible). All parties are good, smart, talented people. They’re going to go places. They just have different instincts on what they could realistically sell in a year.

So how do you bridge this gap? If you start from a ‘rewards’ or ‘profit’ first mentality, the answers are as black and white as the text on this page. With some simple numbers that any company can get their hands on, you can make sure the sales goals directly correspond the rewards for the individuals (for the owner, it’s net profit, for the designers, it’s their wages).

Let’s use our imaginary friend Dan to put some real numbers to this example. Dan would like to finish up the year doing about $1.2M in design-build sales. He has 2 designer/sales-people. Dan sells some of the work, but he’d like to transition out of sales and is hoping his design staff can pick up the slack. One is more experienced than the other, and is better paid, so Dan assigns the following sales goals:

Position Annual Salary/Wage Sales Goal
Senior Designer $60,000 $600,000
Junior Designer $45,000 $400,000
Dan’s Sales (Owner) $200,000
Company Total $1,200,000

Looks reasonable, and it adds up to $1.2M, but is it right? Before we dive right in, we just need a few more (very)important numbers.

The senior designer looks at Dan’s goal and says “Dan, it was a struggle to get to the $500k mark. I can’t do $600K.”

Dan wasn’t profitable last year and he knows that’s never going to change unless his company sells more work. If anything, in Dan’s mind, the goal needs to be even higher! But neither one knows for sure. Until they turn to the facts.

Let’s start with the Senior Designer’s sales goal and figure out who’s got it right.

Note: the numbers used in this article are realistic averages but are intended for example purposes only… they can’t be considered applicable to all companies. Know your company’s numbers.

STEP ONE: Budget the overhead to be covered by the senior designer

Dan’s company has $300K of overhead expenses for his design-build division. That’s a pretty average overhead budget for a company of his size ($1.2M in sales). His designer’s sales goal is $600K, or exactly half of his total design-build sales goal of $1.2 million. It’s logical then to assign exactly half his overhead, $150K, to this senior designer’s jobs.

STEP TWO: Estimate cost of goods sold expenses

Dan’s costs to do the work (the costs of labor, equipment, materials, subs), on average, consume about 67% of the selling price of the job. This is also in the normal range. 60%-70% is typical of a successful design build company. 45% to 60% is typical for a successful maintenance company.

You can estimate your own cost of good % by dividing your total job costs (field wages + equipment + materials + subcontractor expenses) by your total sales. Note that different divisions can have very different averages. For example, install work usually has a higher cost of good sold % because of the material expenses involved.

With these numbers alone, we can easily determine if this design/salesperson is overpaid or underpaid using our ‘rewards-first’ process.

Start With:Senior Designer’s Sales Goal $600,000
Subtract: Company Reward (Net Profit at 10%) -$60,000
Subtract: Senior Designer’s Salary -$60,000
Subtract: Estimated Job Costs @ 67% of sales goal -$402,000
Subtract Share of overhead MINUS the designer’s desired
salary (since we already included it above) $150k – 6$0k
-$90,000
Result (amount left over) -$12,000

Uh-oh. That’s not going to work. We’re $12,000 short. Who’s going to eat that? Overhead is fixed, there’s nothing we can do about that. We can’t just cut job costs – we need those workers and materials. The company has to make a fair profit or we might as well close the doors. So what gives?

The answer is simple. Using a reward-first approach, this designer is worth an annual salary of $48,000. That will offset the $12,000 shortfall and everyone will be happy.

Except, of course, the senior designer! They insist that they need to make $60K! They’ve got a family, kids, a mortgage and we like this person. So, using our rewards-first approach, let’s set a goal that works for everyone.

In the example below, I assume overhead remains fixed. Overhead costs won’t necessarily change if we increase our sales by a nominal amount, but they will change over time and it should be recalculated each year at a minimum.

Start With:Senior Designer’s Sales Goal $650,000
Subtract: Company Reward (Net Profit at 10%) -$65,000
Subtract: Senior Designer’s Salary -$60,000
Subtract: Estimated Job Costs @ 67% of sales goal -$435,000
Subtract Share of overhead MINUS the designer’s desired
salary (since we already included it above) $150k – 6$0k
-$90,000
Result (amount left over) $0

Perfect. If our sales/designer wants to make $60K/year, their sales goal is as black and white as the text on this page, and it took about 5 minutes to figure it out. Dan’s confident that he’s set a profitable sales goal, and the designer understands that this isn’t just throwing darts at a goal. The math does not lie. Hopefully, the very next thought in this designer’s head is “Wow. If could sell $900K, I could make $90K!” And, for Dan, they’d be worth it.

Now repeat the same process for the junior designer so they understand what they’re worth and the sales they need to generate to reach their desired income potential.

Of course, we need to make sure these estimates are accurate and that the jobs are finished on budget. But your field staff’s productivity can be improved using the same rewards-first approach. Next month, we’ll take a look at how to set Production Goals for foremen, with the same clear accountability to simple facts and numbers and not gut instincts.

Two workshops coming to Ohio! [Cleveland + Columbus]

EventHeader-Planet-Small

Back again for 2 dates in Ohio! Landscape Management Network along with OLA and Ohio CAT are going to show you how easy it is to take the guesswork out of running your landscape company.

Day One

Give us just 6 hours and we’ll make building your 2014 operating budget one of the simplest, but most effective activities you can do for your business.  You’ll bring some simple financials, and then use them to learn exactly what you need to sell, how productive your staff is, how to calculate your breakeven on any job, and what you could be selling/generating if your company ran more efficiently.

Day Two

More than just building a budget, Day Two is about using it to calculate what you need to charge per hour, per day, and for every estimate to ensure that your prices cover enough costs, overhead and profit.  You’ll never be more confident putting a price in front of a customer as this workshop shows you exactly what your company needs to charge to finish the year with a healthy, sustainable profit margin.

Once you’re priced right, the last piece of the puzzle is doing the job right.   You’ll learn methods for better job planning, real-time job and progress tracking, and how some of the best companies in the industry track job costs with systems so simple that they can and will work for any sized business.

Learn More

Cleveland Workshop

Nov 18 + 19 2014. Click the Learn More button for details.

Learn More

Learn More

Columbus Workshop

Nov 20 + 21, 2014. Click the Learn More button for details.

Learn More

Can’t get to GIE? Download Mark Bradley’s Presentation

GIE-header

How to Get Jobs Done on Time, on Budget

October 22 @ 9:30 am – 11:30 am

Mark Bradley, President, TBG Landscape and the Landscape Management Network

With all the focus on time studies, site measurement, and dialing in your estimates, many companies have lost focus on what really counts when it comes to profit: finishing your jobs on time and on budget. Every hour/day over budget is not just increased costs, but it’s also hours and days of lost capacity for more sales. Join Mark as he explains the simple secrets to his landscape company’s industry-leading productivity numbers and how work flows from the original design or contract right through to the final invoice.

– Attendees will leave this session with:
– Ideas + systems to setup and plan jobs before they start
– Ways to teach order of operations and job staging
– A system to setup estimates for simple job costing with no extra time/effort
– Ways to make staff care enough to make it actually happen

ALSO join LMN at their booth (#10212) at GIE for more information or to demo our systems and our Mobile Timetracking Solution.

Download

Download Mark Bradley’s Presentation

Download Mark Bradley’s Presentation for GIE, How to Get Jobs Done on Time, on Budget.

Download

GIE Tradeshow Speech – How to Get Jobs Done on Time, on Budget [Mark Bradley]

GIE-header

How to Get Jobs Done on Time, on Budget

October 22 @ 9:30 am – 11:30 am

Mark Bradley, President, TBG Landscape and the Landscape Management Network

With all the focus on time studies, site measurement, and dialing in your estimates, many companies have lost focus on what really counts when it comes to profit: finishing your jobs on time and on budget. Every hour/day over budget is not just increased costs, but it’s also hours and days of lost capacity for more sales. Join Mark as he explains the simple secrets to his landscape company’s industry-leading productivity numbers and how work flows from the original design or contract right through to the final invoice.

– Attendees will leave this session with:
– Ideas + systems to setup and plan jobs before they start
– Ways to teach order of operations and job staging
– A system to setup estimates for simple job costing with no extra time/effort
– Ways to make staff care enough to make it actually happen

ALSO join LMN at their booth (#10212) at GIE for more information or to demo our systems and our Mobile Timetracking Solution.

Setting up Snow Contracts In LMN’s Timesheet App

Love it or hate it, snow is just around the corner.  Don’t wait until the last minute to get yourself ready – or you’re going to be faced with another year buried under paperwork.

Go paperless with LMN Time for your snow operations.  Track employee time, GPS locations, salt applications, weather, equipment notes, site notes, site maps and more – all in the same application and all without any paperwork… To learn how, we’ve put together a series of videos to help  with all of the above and more.

 

Snowplow Timesheet App

Click the image above to check out our LMN Time for Snow videos

MLP Business Seminar, Workshops & BBQ

Common Problems… Simple Solutions

MARK BRADLEY, President of TBG Landscape and Landscape Management Network in Brooklin, Ontario Canada, was a huge hit at New England Grows this year.
He returns to Massachusetts by popular demand to deliver even more of his practical business tips. Mark will guide landscape professionals through ten simple systems that solve problems limiting the potential of so many landscape businesses. You’ll learn how Mark’s company sets up accounting systems, builds a plan for profit, calculates the right price for every job, and creates an environment where employees are inspired to think, act, and be rewarded like owners.

FULL DAY – Business Seminar, Workshops & BBQ
$79 MLP Members
$109 Non-Members
12:30 – 7 p.m.

HALF DAY – Workshops & BBQ
3:30 – 7 p.m.
$39 MLP Members
$59 Non-Members

Register Now

LMN has a New Update! – July 2014 Release Notes

LMN Release Notes for July 2014 Update

LMN Time New Feature: Add Forgotten Employees to Timesheet

Adding a (forgotten) employee to a timesheet that has already been completed was an unnecessarily inconvenient task. For construction jobs, it was simple enough, but for maintenance timesheets, it involved adding the employee to each and every job on the timesheet one at a time. No small feat if your crew hit 15-20 sites that day…

So to make it easier, we’ve added the ability to add a new employee to an existing timesheet by copying an existing employee’s hours. Here’s how to do it:

1. Open the timesheet on which you wish to add the new employee
2. Make sure the timesheet is set to In Progress (if it’s already been Submitted/Approved)
3. Click the Manage Crew button (it looks like 2 heads in the bottom task bar)

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4. On the following screen, click the Add Employee button

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5. The next screen will show you two drop down boxes. In the 1st box, select the employee you wish to add to this timesheet. In the 2nd box, select the employee whose time you wish to replicate for the new employee.

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6. Click the Save button (the disk) to save this change.
7. Confirm you wish to add this employee on the prompt screen that follows
8. Click the Back button in the app bar menu (the left button on the bottom of the screen) to return to your timesheet.

That’s it. The new employee’s time will be added using all the same clock ins and clock outs as the employee whose time you copied. Make any minor adjustments now (if necessary).

LMN Time New Feature: Tasks Can Be Excluded from Overtime

Until now, there was no way to track sick/vacation time in LMN Time without those hours counting towards an employee’s overtime totals.

That ends with this update, as we’ve added a new field on tasks that allows you to exclude hours on a task from overtime calculations.

Now you can track payable, non-working hours by setting up company job(s) for sick time, vacation time, etc. (note: you only need to set these up if these hours are paid time)

1. Create a new job with your company as the ‘customer’. Call the job “Paid Benefits” or something like that
2. Create tasks for Sick Pay, Holiday Pay, Vacation Pay etc. as required
3. Make sure to tick the Exclude from Overtime calculations checkbox to ON if these hours do not count towards overtime calculations (they don’t count in most states/provinces)
4. Save your task
5. Make sure the PAYROLL ITEMS for the job are set to use Sick Time, Holiday Time etc. if you have specific payroll items for those hours in your payroll software
6. Save your job

Now, when your employee needs to have hours entered for any paid benefit hours, clock them in to that job. For instance, if the employee is eligible for 8 hours pay for a day off, clock the employee in from 8am to 4pm (or any time that totals 8 hours) and they will be paid accordingly.

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LMN Time New Feature: Export Job List to a Spreadsheet

A few users requested the ability to export all their job information (job names, addresses, client info, etc.) into Excel Spreadsheet format. That new feature has been added in this build.

1. Go to Reports
2. Click the Jobs tab on the report screen
3. Run the report called Job List (Excel Format)

5

LMN Time New Feature: Paychex Preview Integration

In response to significant demand for Paychex integration, we’ve created two export file formats that will export time and payroll information out of LMN Time and into Paychex. If you’d like more information on how to integrate, you might need to talk to a representative at Paychex. Email us at support@golmn.com if you need any help in this direction.

1. Go to Reports
2. Click the Exports tab on the report screen
3. Run the reports called Payroll Export (Paychex) or Jobs Table (Paychex)

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LMN Time New Feature: Renew Jobs

This release also includes the ability to renew existing jobs. This feature comes in handy for multi-year contracts. Renew jobs creates a brand new job with all the information contained in the old job. This way, however, all your time and billing information gets reset to zero, and you can start tracking the next year’s jobs with a fresh slate. It’s critical for separating year over year time data on a job.

1. Click the Jobs tab
2. Use the checkboxes on the left side to select the job(s) you wish to renew (it may help to filter your list by Job Group)
3. Click the Renew Jobs button in the bottom task bar

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4. Choose the options you wish to apply when renewing the job
a. Add Suffix – use this to auto-add a suffix (e.g. 2015) to the end of all job names
b. Generate New JobIDs – turning this option ON will auto-generate a new JobID for all renewed jobs. Turn this option off to use the same JobID as the previous job
c. Update Job Groups – Turn this option ON to automatically remove the old job from any job groups and replace it with the renewed job
d. Link to new QB Jobs – Turn this option ON to link this job to a new job in Quickbooks (recommended ON. This will create a new job in Quickbooks so you can do jobcosting on the job for a specific year). Turn this option off to leave the renewed job linked to any existing QB jobs

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LMN Estimating New Feature: New Reports for Service Estimates

Two new proposal layouts for service estimates are available (by popular request!). These estimates show a seasonal total for all services labelled as Per Season (i.e. the individual prices for each service aren’t shown, just the total).

Any services flagged as Per Visit or Per Hour/Unit are shown at the end of the proposal under the Contract Enhancements section. Prices are shown for each.

These reports are available in the proposal list under the names:

  • Proposal – Show Monthly Payment Only – only shows the per payment total (does not show the total price for the whole season)
  • Proposal – Show Seasonal Total Only – shows the seasonal total, as well as the total per payment

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LMN Time Improvement – Better Warnings for Timesheet Mistakes

In an effort to reduce mistakes where two foreman have tracked the same employee on 2 different timesheets, we’ve added a new color-coded warning flag on the Payroll Warnings tab on the Timesheets screen

1. Click the Timesheets tab
2. Click Payroll Warnings
3. Select the week you wish to review
4. If an employee appears on multiple timesheets on that date, or there is any overlap in time between two timesheets, a warning flag will appear…

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We strongly recommend your office staff reviews Payroll Warnings daily, or at least weekly to spot any possible timesheet errors that may have occurred between different timesheets on the same date.

LMN Time Improvement – Internal Notes Added

We have added a feature to each job in LMN Time, the ability to now add internal notes to each job. These will NOT show up for your crews clocking in.

1. Open a job in LMN Time.
2. Click Notes on the Left.
3. Enter your notes and hit save in the bottom right.

Screen Shot 2014-07-29 at 10.43.48 AM

Download

Download Release Notes

Click the button to the right to download these release notes in PDF format.

Download