Project accounting measures the financial aspects of project performance. Once the budget is agreed, costs need to be tracked and performance measured from day one, if the anticipated profit is to be achieved.
For all but the simplest project, this requires project planning and estimating at task level, so that realistic estimates can be worked up into an achievable budget. Innate’s resource management software provides core project accounting capability.
Project costs typically relate to:
- Actual hours spent by resource on the project. Timesheet software easily captures this and cost rates can be applied, to convert hours to costs.
- Expenses. Resources that work on the project may incur re-chargeable expenses. Having an expenses tracking option in the timesheets system makes sense.
- Costs of external items. These are often tracked separately through the finance system.
Forecasting remaining costs should be based on the value of the work done, the Earned Value. This requires an objective assessment that should be independent of the actual effort expended. Individual resources doing the work can be asked to estimate their remaining work when filling their timesheet.
Variances can then easily be calculated to show the degree of under or over performance to date. Where the variance is significant, the forecast of outstanding effort should be re-assessed, so that the likely impact on project profit can be seen. This needs to happen early on if corrective action is to be effective.
Performance charts, such as that shown below, are useful for communicating the implications of performance.
Innate’s software for Project Accounting
The responsibility for project accounting can span operations, such as project management, and finance. Project Accounting modules are often part of the corporate finance system, but where project managers have profit responsibility, they need their own operational tool as well.
Innate’s resource management software fits the bill for operational project accounting. Alongside the project and resource management functions needed to plan and staff each project, we provide:
- Project budgets for hours, costs and revenue. These can easily be worked up from the detailed estimates.
- Timesheets capture actual hours spent and project managers enter the Earned Value, for project tracking and performance measurement.
- Expenses can be recorded as part of the time entry, or separately.
- Cost and billable rates are managed. There is no restriction on the number of rate sets, so each ‘time and materials’ project can have its own set of billable rates. Activity based costing provides role base rates, where an individual’s tasks span more than one rate.
- For fixed price or stage payment projects, monthly revenue recognition can easily be computed, as can the amount due at the billing points.
- Irrespective of the billing method, costs are tracked so that project profitability can easily be monitored.
Data exchange between the Innate resource management software and finance’s accounting system is easily managed. Our experience includes MS Dynamics GP, NAV, SAP and Sage products. Staging tables that permit finance to review data before acceptance are popular.
Project Accounting measures the financial performance of your projects. Innate resource management software provides effective project accounting.