Project Accounting
- How can I ensure that my accounts truly reflect the work that I am doing?
- What is Project Accounting?
- Why might I need Project Accounting?
The problem with projects, in accounting terms, is that the duration of a project may well cover more than one accounting period. This means that your billing timetable may not match your activity timetable. For example, you may need to accept payment in arrears whilst continuing to incur costs from sub-contractors. It could mean that at any given moment, your management accounts are inaccurate, especially in your gross margin and cash flow.
You may provide a service to a client over a period of several months or even years on an ongoing basis. One such example would be a membership service. Whilst you may be receiving payment as a one-off yearly subscription, it is important to match income to when you actually carry out the work, which is spread over the whole year.
We can help by implementing project accounting. Our knowledge and experience in this area mean we can provide solutions such as the routine accrual or deferral of income and costs, a process which evens out the figures and allows for a more accurate picture of what is happening within a specific timeframe.
The point of the exercise, if you run a project-based service, is to make your management accounts more useful and meaningful - you cannot manage your business effectively if you do not have accurate data. It can take out peaks and troughs in the revenue and cost lines on your profit and loss account. A good accountant will ask you for this information when they prepare your statutory accounts - we say that you should have that information all the year round.