Project Accounting: Seeing every project through
Going over budget and underestimating the time needed is among, if not the most common causes of project failure. Yet many businesses struggle with this fundamental yet crucial aspect of every successful project, often because of a vague understanding of what Project Accounting entails and how it differs from standard accounting.
Project Accounting tracks the progress of a specific project from a financial perspective to make sure that:
- Work on a project is continuous and completed on time
- Resources are used effectively and efficiently
- Correct and accurate billing is carried out
Apart from the big picture/business-wide view versus the per-project view of standard or “business as usual” accounting and Project Accounting, both disciplines have key differences in their level of detail and how reports are prepared. Project Accounting has a start and end date that is far more detailed, reports more frequently, and involves forecasting to help project managers make sure that the goals for every stage of the project are met.
Larger businesses find Project Accounting particularly useful because of the way it helps to make sure everyone working on a project is on the same page, even if they’re from separate teams or departments.
Every step counts.
Project Accounting may cover one or more internal projects of a business or projects that a business carries out as a service for a client or on a client’s behalf. Examples of projects that require the expertise of a Project Accountant include:
- Construction or development projects
- Marketing campaigns
- Market research
- Media events
- Movie productions
- Product development or launches
The job of the Project Accountant (who is ideally a CPA) begins even before the project is underway when the project leaders assign responsibilities to different team members and determines how each member’s contributions to the project will be recorded. The project budget is then broken down and every expense is recorded according to the project’s objectives. Periodic reviews also enable project leaders to make timely decisions as they assess the progress being made.
Quantifying project progress.
To help these key decision-makers figure out how well a project is progressing, Project Accountants use different calculation methods which include comparing costs, tracking how much work was put in, and how much time was spent. This allows them to give project leaders a percentage of the project’s completion. Note how certain calculation methods, as well as billing structures, will be better suited to certain project types.
The reports resulting from these calculations will tell business owners and/or their clients what they most want to know—whether their project was a worthy investment. Software that has been specifically designed for Project Accounting can go a long way toward facilitating the preparation and ensuring the reliability of these reports.