Project managers are often required to wear many hats: project accountant is one of them. Keeping track of project expenses is one thing, but true project management accounting— analyzing transactional flows, predicting and managing risk—can be a daunting prospect.
Let’s take a look at how you can handle project management accounting, even if you’re not a CPA.
Project Management Accounting 101
At its most basic, a project is a process that brings about a final result. Depending on the complexity of your project, this process is subject to change, and each change brings about risk.
As a project manager, your job is to both minimize and manage that risk. The natural way to manage any project is to document the project workflow at the outset of the project. Your workflow should incorporate what information is needed, what steps are required, and how much time and money should be allotted for each step, in order to bring about your final product on time and on budget.
Creating this workflow at the beginning of your project will let you…
- Set realistic goals and project budgets
- Ensure all parties are aware of your project plan
- Identify areas where additional expenses may be incurred.
Managing Scope Creep
It’s important to note that no matter how good your workflow is, it can’t predict all possible risks. As the project progresses, there are often outside factors, such as unexpected gaps, additional demands from clients, or issues with vendors or freelancers, that can increase the scope of your project.
This is known as scope creep, and managing this creep is one of your most important parts of being a project accountant. There are three key elements of managing creep:
Communication.
Attend meetings and be CC’d on all meetings whenever possible. When any new scenario comes up, you need to…
- Ask the right questions. Think like an auditor, and don’t be afraid to raise red flags when you’re worried about scope creep and a lack of corresponding resources.
- Meet with your project team members to evaluate (1) how proposed changes will effect the project budget and schedule and (2) if the changes justify the costs and/or delays (if any).
- Clearly convey this evaluation to any internal and/or external teams.
Negotiation.
Once all parties are aware of the scope change, it’s up to you to either uphold the original plan, or negotiate changes to it, including requesting an increase in resources to accommodate those changes.
Documentation.
Nothing is more important than keeping the proper documentation This includes…
- Keeping a copy of the original workflow / project plan.
- Tracking all project information input.
- Documenting each step of the workflow
- Tracking all files generated by the project.
- Report on project results.
Documentation is crucial to communication and negotiation. It will also help you look back and see where your project didn’t reach certain milestones, encountered bottlenecks, or went over budget, so you can improve your workflow for the next project.
Gryffin Makes Project Accounting Easy
Taking an active role in project accounting isn’t easy, but it’s a vital part of the success of any project and business. But just because you’re not a CPA, doesn’t mean you can’t rise to the challenge—especially if you have the right tool to help you.
Gryffin makes project management accounting easy; it allows you track communication, documents, and project expenses all in one place. You can easily track tasks, workflows, and milestones, and generate reports to audit your project’s performance.
With these tips, you’ll be able to get a handle on your project management accounting in no time.