Project accounting Why an accounting method will change the way you work.
profits and losses, utilization, margins, earned value, and more on a much more frequent basis. In this way, project accounting allows you to monitor everything in real-time, instead of after the fact. This shorter timeframe allows you to have much more control over smaller decisions — which are often the ones with the biggest outcomes. Moreover, when your firm starts practicing project accounting, em- ployees who are lower down on the organization chart will need to get involved in the decision-making process. Your project managers have to monitor everything since they’re the ones on the ground. Even if your firm is too small to have a real hierarchical organization, everyone must be in the loop. Benefits of project accounting Following is a short overview of the main reasons why you should think about adopting project accounting in addition to standard ac- counting procedures. Get the insights you need to increase efficiency and profits — This is the guiding rationale behind project accounting, after all, and it’s applicable to everyone from solo practitioners to large firms. Tracking data on the project level gives you the ability to pinpoint — and make the most of — sources of profit, while actively identifying problems before they ruin everything. For example, if you know you’re eroding margins when you’re only 30 percent finished with a project, you can immediately make changes to the way things are being done. There are so many more insights you can get, from who your highest-performing employees are to which
Do you understand how profitable your current projects are? Do you know which employees perform best when they’re analyzing test re- sults and which excel at negotiating? Can you pinpoint the reasons why a certain project was so much more successful than another? If you have a general idea of these answers but lack the hard data, it’s time to look toward something called project accounting. Project accounting is essentially just the practice of accounting on the basis of individual projects. In reality, though, it’s so much more. If you do it correctly — and have the right tools — project accounting will transform your firm. You’ll complete projects on schedule and within budget, you’ll have more time for new ideas, and you’ll experience the financial success it takes to win big clients and make your dreams a reality. Project accounting versus standard accounting Project accounting is all about the details. While standard financial ac- counting is essential for the health of your business, project accounting helps drive the success of individual projects. Timeframes are a large difference between the two practices. Your firm may review financials on a monthly or quarterly basis, but projects may be over in less time than that. Consequently, you need to measure
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csengineermag.com
february 2018
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