The Benefits of Real-Time Project Accounting for CFOs
Real-Time Project Accounting for CFO provides many benefits including exactly which projects result in the most profit.
Both project accounting and financial accounting provide critical information for CFOs in professional services firms. The benefits of real-time project accounting may come as a surprise, though. Looking at a project in the rearview mirror is one thing; understanding what is happening from a finance perspective while it’s happening is quite another.
Looking only at financial accounting data leaves some holes in the overall picture of how a projects-based business is actually performing. Project accounting can fill those holes, and real-time project accounting offers an opportunity to make adjustments as the project progresses, which can improve the final result.
Why project accounting?
Project managers aren’t accountants, so why ask them to handle accounting? The biggest reason is so that a clear and accurate understanding of the profitability of each project can be reached. When you’re only looking at financial accounting, you only see the overall profit and loss, but project accounting shows details pertinent to each project. It’s the difference between seeing a structure and the individual bricks that make up that structure.
What are the differences?
Project accounting has a beginning and ending date associated with the project. It offers a view of finances limited in scope and time, while traditional financial accounting is based on a period that extends throughout the year.
Another big difference is that financial accounting is concerned with the company’s profit and loss but project accounting is based on deliverables. Both are necessary to understand the company’s full financial health.
Benefits of project accounting
One common problem in professional services businesses is that its unclear which projects are the most profitable. Project accounting shows exactly which projects result in the most profit.
Once you have that information, it’s easy to track trends. You can see which types of projects require the most resources, which types are more in-demand, and which result in the highest margins. All of this information in aggregate can help you better allocate resources and make accurate forecasts.
The real-time edge
As useful as project accounting is in hindsight, using it in real-time amps up the benefits even more. When project accounting is done in real-time, decision-making is vastly improved. Risks are also reduced, because you can see exactly what’s going well and what’s not and make adjustments as needed.
For example, if you see that a project is only 50% completed, but 80% of the budget has been used, there’s still time to make adjustments and avoid potential shortfalls and delays. Project accounting allows you to identify risks and respond quickly.
You also have clearer insights into costs, bids, and scope for new projects. Combining the historical data from project accounting with an understanding of what is happening in real-time means that you have a complete picture of your financial position as you enter new projects.
Find out more
If you’d like to learn more about applying real-time project accounting to your professional services firm, and what the benefits are for the CFO specifically, get in touch. We’ve worked with hundreds of professional services companies and understand the particular accounting issues you face day-to-day and project-to-project.
