Project Accounting Best Practices
Wiki Definition: Project accounting (sometimes referred to as job cost accounting) is the practice of creating financial reports specifically designed to track the financial progress of projects, which can then be used by managers to aid project management.
Other famously used BUZZ words for project accounting are: Construction In Progress accounting (CIP), CAR, Planning, etc.
Typically, people think that project accounting is about tracking invoices for line items, only in regards to construction projects. However, there are many uses of ‘project accounting’ that take it outside of your typical (and obvious) construction projects. Some examples are:
- Retail, Grocery & Restaurants: remodels, store openings, maintenance shell, POS implementations
- Machinery & Equipment: manufacturing, breweries (one of my favorites), aerospace
- Technology Projects: server room build outs, data centers, updating infrastructure
- New Construction: new buildings, additions, remodels
- Other Creative Ways: PO system, Clearing Account for assets in idle, etc.
Now that we know (or just realized) what can be considered CIP (or Project Accounting), the question is how are you keeping track of all of your Construction In Progress (CIP) accounting? Let me guess… spreadsheets?
Did you know that although spreadsheets can be pretty fancy (I’ve seen plenty), they make it extremely difficult to pull together a consolidated budgetary report that represents where your project is at any given point of time — and whether you are over or under budget. If this is you, you should ask yourself the following questions:
- Can you obtain the proper reporting? Spreadsheets are not reports.
- Have you inherited that spreadsheet template?
- Have you tested the accuracy of your formulas?
- Do you change the template based on the project?
- Once those Line Items are complete, where and how do you place them into service for depreciation?
If you answered “No” to at least three of the questions above, then you should look to automate this process. Automating is really beneficial to everyone affected by CIP (accounting, construction, facilities, maintenance, budgeting/forecasting, tax, etc.). To learn more about project accounting feel free to check out DSD’s web page on Fixed Assets – Planning or email DSD Business Systems with any questions.
written by Angie Bolton, Fixed Assets Consultant at DSD Business Systems