Updated August 2024
When your firm adopts project accounting—the practice of accounting on a project-by-project basis—you’ll get insights that’ll change the way you manage project and your business. You’ll understand your projects, employees, clients, and firm on a deeper level, and you’ll be able to use data to inform changes that will dramatically increase efficiency and profits.
Just like in standard accounting, or any other type of quantitative work, it’s nearly impossible to reach any conclusions with project accounting if you aren't collecting accurate data. With the right tools in place, logging and making sense of the data you need is convenient and easy. Importantly, the data needs to be easy to collect, accurate, up-to-date, and of course you need the reports to interpret the data to allow you to make better management decisions. This is where firm management software comes into play.
Develop the Habit of Tracking Your Time and Expenses
Time and expense tracking is foundational for analyzing any type of business that works on a project basis. Your employees are your most valuable resource, the basis of your biggest expenditures (i.e. salaries), and what your clients pay you for. Understanding how they work, where they spend their time, and making sure your are paid for their efforts is paramount to managing projects profitably.
Even if you charge fixed fees for your projects, you could be missing out on hard-earned cash by not tracking your time. You need to make sure you charge enough to cover all the effort that goes into your projects. It is also important to know when your team works on things outside the scope of the contract - creating an opportunity to bill for additional services.
Tracking time also arms you with data to better plan future projects. If you find that a project phase takes more time than you previously estimated, then your fixed fee should be adjusted for the next proposal.
It’s hard to know if your projects are even profitable without examining the resources that went into them. Plus, if you can’t measure something, any attempt at improving it will be haphazard at best.
Find the Right Project Accounting Tools to Make It Simple
Despite the importance of managing time and expenses, it’s never easy to get your employees, or yourself, to fill out their timecards. People complain, you have to remind them constantly, and crucial information always comes in late. In order to fix this messy process, you need to remove the friction.
Find software that gives you flexible tracking options, like timers and intuitive timecards. A mobile app will make things go even more smoothly. Ideally, you should also be able to centralize all your information that’s related to those time and expense entries by attaching notes and documents to them.
Software can take many of the menial tasks off your plate. Automatic reminders to fill out time cards, guidance to your team on what projects they are assigned to, and automated time sheet approvals and reports can all make this process less painful.
To keep your data accurate, software can also help ensure your team in entering time in the right categories. This can prevent lost billable time, while also making the data a better indicator of the actual performance of the team.
Assign Staff to Projects, Phases, and Tasks
It’s worthwhile to see how many total hours an employee worked, but it’s even better to know specifically what they were doing - both on billable projects as well as unbillable time. That way, you can ensure that you’re making the most out of your resources and your staff isn’t wasting their time. You should start with assigning your staff to the right projects, phases, and tasks.
This is one of the solutions to the questions, “What is everyone working on?” and “What am I supposed to be working on?” With a list of the right assignments in front of you (and pre-populated on your time card), focusing will be much less of an issue.
While assigning tasks, allocating hours, and assigning start and end dates may seem daunting, when you have the right software to help you, it’s actually pretty simple. And by opening up the software tools to your leadership team and Project Managers, you can delegate some of this responsibility to others on your team. This opens your time to focus on the higher value tasks only you can do.
Combine Time, Expenses, and Projects with Billing and Accounting in the same tool
Putting your billing and accounting data on the same platform as your time, expenses, and projects is a wise decision if you’re serious about project accounting. It will make many reports and analysis infinitely easier, like calculating your ideal and effective bill rates and pay rates. Even more importantly, you’ll be able to instantaneously learn about the profitability of your projects, clients, and employees.
What You’ll Gain…
When you’re consistent about tracking time and expenses and use software that combines that data with project management, billing, and accounting, you’ll have the information you need for full-fledged project accounting that’ll boost your efficiency and profits.
BQE CORE gives you visibility into where your projects are so you can quickly decide which actions to take to ensure the best results. You’ll make billing decisions in real-time, prevent budget overruns, understand your staff’s workload, while properly managing your cash flow. Forecasting, budgeting, and even hiring will be more straightforward when you can properly predict—and optimize—the amount of cash flowing into your firm with CORE. Moreover, your clients will appreciate your accurate estimates, realistic timelines, and improved efficiency.
All of these benefits come from a basic yet essential foundation. And with BQE CORE, it’s easier than ever to lay it.
Try a free demo today to see how BQE CORE can improve your project accounting.
