Project accounting consists of segmenting expenses, revenues, material costs and salaries associated with your projects in order to obtain a clear view of their profitability, regardless of the duration of the project (short, medium or long term). If your business delivers its services mainly in the form of projects, for example for house construction or website development, well-kept accounting will allow you to identify the most advantageous types of projects and ensure that they remain profitable . Here are some things to consider as you prepare your projects in QuickBooks Online Plus (QBO+).
Think “Project with QBO +”
Think of project accounting as a container in which all the financial data associated with a project is recorded. The “Project” feature in QBO+ helps you plan, stay organized and track the different elements of your project, as well as produce reports. In addition to establishing income estimates, you will also be able to:
- establish cost estimates;
- easily compare your actual costs to the estimated costs during the project;
- identify potential overruns;
- to rectify the situation quickly.
What to include
Your projects should include all related costs and revenues in order to have a realistic overview of their profitability. They therefore include fixed costs, variable costs and overheads, subsidies, project billing, recycling or waste treatment costs, projected revenues, etc.
Decision support
Project accounting can help you select and prioritize your projects or clients based on your immediate reality. During a busy period when your resources are in high demand, you will undoubtedly choose to prioritize accepting the types of projects that are generally the most profitable. Then opt for those with lower labor costs since they require fewer resources. During slow times, you may take on some projects that are more expensive to complete, but will help absorb overhead costs (rent, salaries, fixed business costs, etc.).
Projects and products
It is also possible to consider your products as projects so you can easily calculate which ones are the most beneficial for your business. For example, consider building the first 100 of a new bicycle model as a project. Enter the costs of parts and materials, salaries, cost of rented space for production, etc. Do the same for the next batches, and validate if your profitability improves satisfactorily.
Dedicated funds
Profitability by project can be very useful for you to monitor your budgets linked to dedicated funds such as research and development grants. This will make your job easier when it comes time to prepare accountability reports to ensure you maintain your credibility with funders and obtain all your tax credits from government agencies. NPOs can also configure the projects function to manage dedicated funds categorized by donor.
If you would like to learn more about project accounting , call a member of our team to discuss. We can support you in properly configuring your first projects and establishing a simple and precise way to monitor their progress to ensure profitability.