Project Accounting Best Practices
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: construction in progress accounting, CIP, CAR, WIP, planning, etc.
Typically, people think its about tracking invoices for construction projects. However, there are many uses of ‘project accounting’ that take it outside of your typical (and obvious) construction projects. Some examples are below:
- Retial, Grocery & Restaurants: rebranding, remodels, store openings, maintenance shell, POS implementations
- Gaming / Casinos: new gaming machine roll out (old vs new), kiosk’s
- Machinery & Equipment: manufacturing, breweries (one of my favs), 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…. blah, blah, blah…) 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 if 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?
- Is it the same template for every projects and is everyone using it?
- Once those Line Items are complete, where and how do you place them into service for depreciation?
If you thought your answers didn’t sound so great… or if you questioned yourself, perhaps you should look to automate this process. It really is beneficial to everyone affected by CIP (accounting, construction, facilities, maintenance, budgeting/forecasting, tax, etc.).