Transcript of "Structuring Your Project Accounting System For Future Success"
Structuring Your Project Accounting System For Future SuccessProject accounting is a critical concept for today’s business world, yet most businesspeopledo not know their project costs. This includes firms that outsource their accounting. Mostmodern firms have very little understanding of which customers are profitable for them,and which ones are profit drains. R&D projects which should have been cancelled long agolinger on. Problem customers continue to not be dealt with effectively.Proper project accounting is one of the many things in life that sounds really easy but, forvarious reasons – psychological, sociological, political – can often be really hard. More andmore, corporate executives are seeking to understand their project accounting costs. If theyknow their project costs – and many don’t – they can discover financial problems withprojects early on and fix them. This can potentially save companies millions of dollars.Unfortunately, many companies have not structured their project accounting system in away that allows them to draw upon the data for future knowledge. While it is important tounderstand a current project, it is equally important to be able to glean information frompast projects and apply that information to future endeavors.Project management data – which is obtained from time-tracking information – is often anarea that could be improved in many companies. Significant cost reductions are commonfrom improvements in tracking time from the project management area alone. Followingare some ways you can structure your project accounting system to increase its value.1. Quality Data In = Quality Data OutIn order for project accounting data to be accurate, the data that is put into the system mustbe accurate. Employees are often resistant to the idea of tracking their time on all of theiractivities. This is understandable; no one has ever gotten a promotion for their exemplaryability to fill out a timesheet. However, the value of this data is tremendous if you need tolook back into a project’s activities or budget or timeline. Employees need to understandthat there are tangible benefits to tracking their time. Without tracking time to specificprojects, it is impossible to calculate the real worth of their time, and the real value of theircontributions to the project. Additionally, not providing accurate time tracking informationwill skew the project accounting data for the entire project.
Bad project accounting leads to unnecessary overtime, stressful, blown schedules, badestimates and cancelled projects. Citing specific examples from your company’s historywhere accurate time collection could have made things easier for your employees helps toget them on board.Tying bonuses or other benefits to complete data collection is often used in customerrelationship management (CRM) tools to adjust sales commissions. The same can be donefor other forms of data collection. Even if you don’t like to dangle a carrot to get results,providing employees with a template for future success can prove the value of accuratetime and resource tracking. However, none of this will work if you don’t…2. Intuitive User InterfaceWhen it comes to choosing a system for employees entering time data which will feed yourproject accounting information, it’s important to consider the system’s interface and easeof use. While your IT professional might be comfortable implementing a system with ahighly-technical front end, other employees will balk at a complex system. Most employeesjust want to enter their time as quickly as possible, and then close the program and forgetit.Instituting a system that will notify employees when their time is due will help withcompliance. If the system pre-populates memorized information and common tasks, that iseven better. Even small time savings for the employee will increase the value ofinformation you will get from them. Make it easy, make it quick, and they will do it right.3. Early Warning SystemIf a time tracking system supports pay rates and pay rules, such as overtime calculations, itcan provide extremely accurate per-project cost data. If not, a record of hours worked perproject is still a powerful indication of cost if an average hourly cost per employee canreasonably be applied.Most project time-tracking systems support some way of indicating what percentage ofeach project is complete. This can create an early warning system for projects that aregoing out of control. If youve spent 45 percent of the money allocated for a project, but youare only 10 percent done, its time to hit the panic button.4. Limited VisibilityAny project time-tracking system that is worth its salt will be able to limit an employee ordepartment’s visibility into the project list. An employee confronted with 500 entries on his
timesheet will usually enter bad data. Pushing this burden up to an administrator willvastly improve data accuracy.You can also use this mechanism to assign people to projects, limit hours on projects, andsee who has been assigned to which tasks. Timesheet systems are unlikely to be as fullyfunctional in drawing Gantt charts as systems like Microsoft Project, but can be integratedwith those systems for the departments that absolutely require it.5. Estimation ImprovementExpensive and complex portfolio planning systems are designed to help you refrain fromstarting projects you dont have the resources to finish. They can save you lots of moneybut their Achilles heel is bad estimates. Time tracking can be particularly helpful inestimation improvement when many of the projects in your company are similar, and theyusually are.Detailed time-tracking data shows the cost of the first phase of a project. If the cost is 10percent and youve spent 100 hours gathering requirements, then any estimate far fromthe 1,000-hour mark should be reexamined. Furthermore, 10 percent is probably thewrong number for the projects in your company, so your mileage may vary. But historicaltime data will give you important insight into what this average is and how variable it is,and therefore, how to perform that calculation.Time, money, and resources need to be precisely applied in order to achieve the bestresults in any project setting. Fortunately, the tools exist to make the determination of thatamount relatively simple. This common-sense approach can make the entry andapplication of project data seamless and simple.Reference Link: http://www.hr.com/en/app/blog/2013/03/structuring-your-project-accounting-system-for-fut_he5ve12i.html