Why an Accounting Method Will Change the Way You Work

Do you understand how profitable your current projects are? Do you know which employees perform best when they're analyzing test results and which excel at negotiating? Can you pinpoint the reasons why a certain project was so much more successful than another? If you have a general idea of these answers but lack the hard data, it's time to look towards something called project accounting.

Given how helpful it is, project accounting hasn't been given enough attention. It's essentially the practice of accounting on the basis of individual projects. If you do it correctly—and have the right tools—it'll transform your firm. You'll complete projects on schedule and within budget, and you'll experience a new level of financial success.

Project accounting is all about the details. While standard financial accounting is essential for the health of your business, project accounting helps drive the success of individual projects. With project accounting, you need to measure profits and losses, utilization, margins, earned value, and the like on a more frequent basis. This shorter time frame allows you to have better control over smaller decisions—which often lead to the biggest outcomes.

When your engineering firm starts practicing project accounting, employees that are lower down on the organization chart will need get involved. Even if your firm is too small to have a real hierarchical organization, everyone must be in the loop.

Now, in terms of the benefits of project accounting, here’s a quick overview…

1. You'll get the insights you need to increase efficiency and profits. This is the guiding rationale behind project accounting, after all, and it's applicable to everyone. Tracking data on the project level gives you the ability to pinpoint—and make the most of—sources of profit, while actively identifying problems before they ruin everything.
   
   There are so many more insights you can get, from who your highest-performing employees are to which types of projects your firm should focus on. In short, you'll finally have the data you need to both take note of minute changes and understand large trends.
2. You'll empower your staff. When your staff manages the day-to-day financials and key performance indicators for their projects, they become responsible for profitability. In essence, each project manager becomes the CEO of his or her project.
   
   Most employees are thrilled to have these reins in their hands and consider it a sign of trust. Moreover, with their performance more closely tied to project profits, you'll likely see an uptick in both.

Involving more stakeholders and more data analysis isn't simple, and if you're a member of a small firm, you might not think you have the bandwidth to undertake this.

However, with the right project accounting software, it's surprisingly straightforward. BQE Core, for example, unifies all the disparate data you need like invoicing, time and expense entries, accounting, project management, and business intelligence. Your goal should be to equip yourself with the right tools, so you can spend your time growing your engineering firm.