Unfortunately, many companies have not structured their project accounting system in a way that allows them to draw upon the data for future knowledge.

1. Structuring Your Project Accounting
System For Future Success
Project accounting is a critical concept for today’s business world, yet most businesspeople
do not know their project costs. This includes firms that outsource their accounting. Most
modern firms have very little understanding of which customers are profitable for them,
and which ones are profit drains. R&D projects which should have been cancelled long ago
linger on. Problem customers continue to not be dealt with effectively.
Proper project accounting is one of the many things in life that sounds really easy but, for
various reasons – psychological, sociological, political – can often be really hard. More and
more, corporate executives are seeking to understand their project accounting costs. If they
know their project costs – and many don’t – they can discover financial problems with
projects early on and fix them. This can potentially save companies millions of dollars.
Unfortunately, many companies have not structured their project accounting system in a
way that allows them to draw upon the data for future knowledge. While it is important to
understand a current project, it is equally important to be able to glean information from
past projects and apply that information to future endeavors.
Project management data – which is obtained from time-tracking information – is often an
area that could be improved in many companies. Significant cost reductions are common
from improvements in tracking time from the project management area alone. Following
are some ways you can structure your project accounting system to increase its value.
1. Quality Data In = Quality Data Out
In order for project accounting data to be accurate, the data that is put into the system must
be accurate. Employees are often resistant to the idea of tracking their time on all of their
activities. This is understandable; no one has ever gotten a promotion for their exemplary
ability to fill out a timesheet. However, the value of this data is tremendous if you need to
look back into a project’s activities or budget or timeline. Employees need to understand
that there are tangible benefits to tracking their time. Without tracking time to specific
projects, it is impossible to calculate the real worth of their time, and the real value of their
contributions to the project. Additionally, not providing accurate time tracking information
will skew the project accounting data for the entire project.

2. Bad project accounting leads to unnecessary overtime, stressful, blown schedules, bad
estimates and cancelled projects. Citing specific examples from your company’s history
where accurate time collection could have made things easier for your employees helps to
get them on board.
Tying bonuses or other benefits to complete data collection is often used in customer
relationship management (CRM) tools to adjust sales commissions. The same can be done
for other forms of data collection. Even if you don’t like to dangle a carrot to get results,
providing employees with a template for future success can prove the value of accurate
time and resource tracking. However, none of this will work if you don’t…
2. Intuitive User Interface
When it comes to choosing a system for employees entering time data which will feed your
project accounting information, it’s important to consider the system’s interface and ease
of use. While your IT professional might be comfortable implementing a system with a
highly-technical front end, other employees will balk at a complex system. Most employees
just want to enter their time as quickly as possible, and then close the program and forget
it.
Instituting a system that will notify employees when their time is due will help with
compliance. If the system pre-populates memorized information and common tasks, that is
even better. Even small time savings for the employee will increase the value of
information you will get from them. Make it easy, make it quick, and they will do it right.
3. Early Warning System
If a time tracking system supports pay rates and pay rules, such as overtime calculations, it
can provide extremely accurate per-project cost data. If not, a record of hours worked per
project is still a powerful indication of cost if an average hourly cost per employee can
reasonably be applied.
Most project time-tracking systems support some way of indicating what percentage of
each project is complete. This can create an early warning system for projects that are
going out of control. If you've spent 45 percent of the money allocated for a project, but you
are only 10 percent done, it's time to hit the panic button.
4. Limited Visibility
Any project time-tracking system that is worth its salt will be able to limit an employee or
department’s visibility into the project list. An employee confronted with 500 entries on his

3. timesheet will usually enter bad data. Pushing this burden up to an administrator will
vastly improve data accuracy.
You can also use this mechanism to assign people to projects, limit hours on projects, and
see who has been assigned to which tasks. Timesheet systems are unlikely to be as fully
functional in drawing Gantt charts as systems like Microsoft Project, but can be integrated
with those systems for the departments that absolutely require it.
5. Estimation Improvement
Expensive and complex portfolio planning systems are designed to help you refrain from
starting projects you don't have the resources to finish. They can save you lots of money
but their Achilles heel is bad estimates. Time tracking can be particularly helpful in
estimation improvement when many of the projects in your company are similar, and they
usually are.
Detailed time-tracking data shows the cost of the first phase of a project. If the cost is 10
percent and you've spent 100 hours gathering requirements, then any estimate far from
the 1,000-hour mark should be reexamined. Furthermore, 10 percent is probably the
wrong number for the projects in your company, so your mileage may vary. But historical
time data will give you important insight into what this average is and how variable it is,
and therefore, how to perform that calculation.
Time, money, and resources need to be precisely applied in order to achieve the best
results in any project setting. Fortunately, the tools exist to make the determination of that
amount relatively simple. This common-sense approach can make the entry and
application of project data seamless and simple.
Reference Link: http://www.hr.com/en/app/blog/2013/03/structuring-your-project-accounting-
system-for-fut_he5ve12i.html