How can project accounting identify over-budget or behind-schedule areas?

Project accounting is a specialized method used to track the financial performance of projects. Instead of looking at a company's overall profits or losses, project accounting monitors the performance of each project separately. This process includes budgeting, cost tracking, performance analysis and financial reporting. It can help identify projects that have gone over-budget or fallen behind schedule, allowing for swift interventions and necessary adjustments to ensure future success.

Project accounting focuses on the financial transactions related to managing a project including costs, billing and revenue. Professionals such as project managers and accountants use this method to integrate key financial tasks on a project-by-project basis and report their progress and success to management.

Project Accountants examine, analyze, and interpret accounting records to prepare financial statements, give advice, or audit and evaluate statements prepared by others. Install or advise on systems of recording costs or other financial and budgetary data.

Over budget is a true Accounting function given the management input. True Construction Financials with all the potential change orders (pco’s) and projections including potential change order and manpower calculations is used and updated throughout the project on a daily basis. Only thru the use of the project management tools including submittals, rfi’s, qc inspections, field reports, meeting minutes and other change documentation tools and the linking of these tools to the budget is the real status known

Project accounting often involves tracking costs at a very granular level, such as tracking the cost of individual materials or labor hours. Regular accounting, on the other hand, typically involves tracking expenses and revenues at a higher level, which includes the overall cost of a department or business unit.

Project accountants often develop a project accounting plan to ensure the projects they manage are completed on-budget and on-time. This plan delineates every cost element in the project and includes regular—even daily—checks. Managers can track the expenditure of resources, such as people, via their timesheets and adjust allocated hours, if necessary. A subspecialty of project accounting is production accounting, which is what a film or television project uses. Project accountants turn each production into a unique project accounting opportunity.

Project control is another essential accounting procedure. Any deviations from the project plan affect the project’s bottom line. Project control can achieve significant cost savings during the planning and design phase, as well as in the advanced stages of the project. Therefore, it is the project manager’s main role to help achieve the best setup and development of the project plan. It’s the project accountant’s role to ensure the project financials such as billing and revenue are set up correctly to match the contract terms for the project. They need to fulfill this plan before they start to identify and mitigate changes later.

Project accounting also includes internal projects such as construction builds, new product launches, advertising campaigns, research or clinical research, long-range purchases and company strategic planning. These are capital projects with discrete beginning and end periods that are not business-as-usual type work.