Project Accounting



Project Finance / Project Accounting

Project accounting is the practice of creating financial reports and information that is specifically designed to track the financial progress of identified projects, which can then be used by managers to aid project management and the decision making process.

Normal financial accounting is primarily aimed at monitoring financial progress of organizational elements (geographical or functional departments, divisions and the enterprise as a whole) over defined time periods (typically weeks, months, quarters and years). This is usually in the form of financial projections, and the analysis of historical financial data.

Unlike normal business activities, Projects differ in that they frequently cross organizational boundaries, may last for anything from a few days or weeks to a number of years, during which time budgets may also be revised many times, as and when the scope of the projects changes. They may also be one of a number of projects that make up a larger overall project or program. This is usually referred to as a Programme.

As a result in a project management environment costs (both direct and overhead) and revenues (Infrequent) are also allocated to projects, which may be subdivided into a work breakdown structure, and grouped together into project hierarchies. Project accounting permits reporting at any such level that has been defined, and often allows comparison with historical as well as current budgets. Project finance is therefore a very dynamic and often changing theme in financial reporting.
Percentage-of-completion is an important benchmark used in project finance. Percentage of Completion is frequently independently assessed by a project manager. Funding advances and actual-to-budget cost variances are calculated using the project budget adjusted to percent-of-completion.

Where labor costs are a significant portion of overall project cost, time sheets are usually used to record these costs on a task level. The capital budget processes are chiefly concerned with major investment projects that typically have upfront costs and longer term benefits. Investment go / no-go decisions are largely based on net present value assessments and are usually assessed as part of the business case. Project accounting of the costs and benefits can provide crucially important feedback on the quality of these important decisions.

Industries that require skilled project finance managers and accountats include:

Information Technology (Systems Development and Implementation)
Government Projects

If you are looking for skilled project financial management and accounting services please contact us on 087 808 6972.