Accounting firms of every size would like to spend more time advising clients and less time on transactional work. Project accounting can help firms move more quickly towards transforming their businesses and become more viable and profitable.
Project accounting has been a little-known secret for the past several years, but its principles are gaining traction with accounting firms. In essence, it is the practice of accounting on a project-by-project (or engagement-by-engagement) basis.
It has some key differences compared to traditional accounting methods and helps drive the success of individual client engagements. It also applies to the details and viability of every single active and inactive client engagement at the firm.
Time is a key differentiator in project accounting. Today, most accounting firms using standard accounting practices review financials on a monthly or quarterly basis, but client engagements may be completed in a matter of weeks or a few months.
Project accounting enables you measure profits and losses, utilization, margins, earned value, and other key performance indicators (KPIs) on a more frequent basis. With the right tools, project accounting allows you to monitor these KPIs in real time, instead of at the end of the month or quarter. This shorter time frame gives you real-time data to make both small and large decisions that will affect the bottom line.
When a firm starts practicing project accounting, more employees are involved in the decision-making process and have a greater responsibility for the success of both the client engagement and the firm’s KPIs. Senior associates and managers monitor progress via key data points since they are the ones doing the work and managing others on the engagement.
Even if a firm is smaller and does not have a real hierarchical organization, everyone must be in the loop. Solo practitioners use project accounting to look at projects from more angles to determine success.
The Top Benefits of Project Accounting
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About Shafat Qazi
Shafat Qazi founded BQE Software in 1995. He holds a master's in structural engineering from the University of New York and a bachelor's degree from the National Institute of Technology (NIT).