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Project accounting software is aimed at helping companies learn which projects are most profitable by tracking project data in one shared location. The idea is to determine how much each project is worth for your business, and how to improve your return on investment (ROI) with each additional project. With the right accounting software, you can streamline your operations to increase profitability per project.
General accounting software offer core functionalities including general ledger (GL), accounts payable (AP), and accounts receivable (AR). However, these general solutions cover all financial areas of a company, such as payroll, rather than focusing on the financial impact of specific projects. A specialized project accounting software offers better benefits for businesses which want to streamline the costs of their project practices.
There are many benefits to purchasing a project accounting software to automate your business operations, including:
Whether you operate a small business or global enterprise, no two businesses run exactly alike. And individual projects within a single company may not be processed the same way. So why should your business use the same accounting software as another company in a completely different industry? A customizable project accounting software can provide the tools for personalizing the process as much as possible to best suit your business needs. This is a great benefit over general accounting solutions which may not be able to handle all the intricacies of different accounting requirements on your varied projects, whether it’s mass production or professional services.
For example, revenue recognition is incredibly complex under the most ideal of circumstances. Depending on your industry, it might not be as straightforward as sending out an invoice when the work is done. If you’re receiving payments during the project, perhaps based on percent completion, you’ll want an accounting solution which can accurately match those piecemeal payments to the right invoice.
This element of customization is particularly important for companies which handle multiple projects simultaneously. Any degree of personalization is crucial for companies which offer a variety of goods and services and want a single system for managing all their accounting. With everything visible on shared dashboards, your entire workforce can see the impact of their work on project profitability.
One way to optimize your project costs is to predict how much a project will cost before you even start. This is where historical data comes into play. Forecasting tools look at past project budgets to determine which costs are essential and which could be improved.
Forecasting job costs can lead to significantly lower project prices in the long run by helping your company find the most affordable resources. In turn, this impacts your resource management by keeping track of what raw materials get used and in what quantities.
Projects can go over budget for a wide variety of reasons. By reviewing project financials in real-time, you can gain a better understanding of how excess spending affects your profitability. Even better, you can use resource planning to put a stop to these unnecessary expenses once they’ve been identified.
Customers don’t want to feel misled when they receive their final invoice. Project accounting software with job costing tools can help your company prepare better bids or estimates for your clients. The closer your initial quote is to the final invoice, the happier your customers will be.
For example, cloud-based project management modules with time tracking allow you to create more accurate timesheets on every project. Once you know how much labor a specific project takes, you can better estimate the costs for future work to maximize your profit margins.
Reports made on each project provide greater visibility into your company’s financials. Select the metrics which matter most and start collecting data on your most valuable business processes. And from a shared dashboard, you can see relevant accounting information on all current and past projects in real-time. The ability to measure day-to-day finances is also useful for illustrating the realities of project costs. You can also document price adjustments from change orders or any additional billable labor.
Project accounting software offers many ways to optimize your financial reporting and budgeting future workflows, it can vary by industry. For instance, if you work in construction or architecture, you may want to consider construction accounting software. These industry-specific products offer extra tools to track financial data and monitor real-time expenses common in construction projects.
Further, project accounting modules are sometimes included in other software packages, such as enterprise resource planning (ERP) management tools and customer relationship management (CRM). Other financial management software is available to handle more specific tasks like payroll which specialized project accounting solutions lack.