Considerations with Project Accounting

Today’s projects are increasing in size, scope and complexity. Greater competition and fewer resources increase the pressure to do more with less, making it vital that you perfect capturing costs and managing work in progress (WIP).

1. Define a meaningful reporting structure 

Having accurate reporting on where high-value resources spend their time is critical if you employ fee earners on different salaries. For example, a construction firm would benefit more from a detailed breakdown into their subcontractor or materials costs.

A collaborative approach allows you to define your cost drivers. The result is job costing analysis that lets you track profit with the minimum of effort:

• Focus on what’s important
• Analyse project performance
• Take early action over problem projects

2. Make it easy for employees to enter costs 

Data entry should be intuitive for non-finance users. Consider systems that:

• Remember ‘favourite’ expense claims
• Supply you with pre-set preferred suppliers when raising purchase requisitions
• Timesheets that automatically load frequently used project codes or information from resource planning tools

Web-based systems are ideal for this task since they let any user capture this information on the move. Having all this functionality available on whatever device is to hand – PC, smartphone or tablet – supports today’s mobile workforce.

With direct cost capture:

• There’s no more rekeying
• You can understand costs at any point in time
• View timely data for WIP reporting

3. Don’t over-engineer your workflows

By understanding what’s key to improving your business performance and involving stakeholders at all levels, you can simplify your processes to what matters, including what affects your profitability, such as cost revisions that threaten to send you over budget.

With ‘by-exception management’ you:

• Reduce complexity and timewasting
• Reduce operational bottlenecks
• Maximise management time and focus

4. Don’t separate finance from the rest of the business 

In many businesses, non-finance sources of information are scattered across the organisation in email accounts, spreadsheets, filing cabinets and peoples’ heads.

Having a single place to refer for the latest non-finance information and the ability to update it in real-time brings consistency and efficiency to the whole process.

The ability to view contracts held in another system – CRM for example – or the latest handover notes, will allow sales and finance to view any changes to their customer situation.

By integrating document management into your finance system, businesses gain the visibility of information needed to deliver the project efficiently. For example, once the client has agreed on signoff, project managers can upload the required documentation to a central store. Triggers in the software alert the financial controller to commence the invoicing process, which in turn accelerates payment and strengthens cash flow.

With centralised project information you:

• Work from accurate and timely information
• Utilise information from other systems
• Decrease risk and improve cash flow

5. Bring WIP online 

By getting your WIP information off separate silos and into one place, a centralised system can streamline reporting. Good processes and the right reporting tools will give the FD and the project managers the information they need, at the right time and in the right format.

A resource planner which automatically populates timesheet information and feeds into the finance system will reduce the complex calculations involved in collating labour.

Once this information is in your system, creating the WIP reports (e.g. cost to complete, time to finish or any other metric you use to assess your project performance) is simple.

WIP management means:

• No more chasing operations for information
• Real-time visibility of costs at any time
• Better control over your cash flow

More information about Project Accounting software