Project-based companies rely on project accounting to control budgets, manage resources, provide accurate billing, and ensure project profitability. Their success hinges on bringing projects in on time and under budget while servicing their clients efficiently and professionally.
Unfortunately, too many project-based companies have been relying on manual processes, aging technology, or a combination of both for too long. The result? Poorly managed projects that fail to live up to their clients’ expectations.
But there’s good news: Professional services companies have their pick of modern software specifically created for their project accounting needs. This means that even as project accountants and project managers face inevitable challenges as their companies grow, there are well-designed, industry-specific tools that can help them overcome each one.
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Overcoming Project Accounting Challenges in Professional Services
Below, we’ll look at some of the most common project accounting challenges and explore why project accounting software is the answer.
4 Common Project Accounting Challenges
Here’s a look at four common challenges faced by professional services firms:
1. Scope Creep
At the start of any project, service providers and clients sign a Statement of Work (SOW), which lays out the agreed-upon terms for budget, timelines, deliverables and more. But—as with most things in life—changes arise, and in terms of projects, this is known as “scope creep.” Scope creep can happen at the hands of the service provider (e.g., unavailable resources) or the client (e.g., design alterations), and a change order request (COR) must be generated and agreed upon before changes can be made.
2. Inaccurate Estimating
The total cost of a project is often unknown, which is why project accountants provide financial estimates based on materials, equipment, labor, time and overhead. When estimations are consistently inaccurate, operational overages and customer unhappiness occurs without fail.
3. Inefficient Project Billing
Every project requires project billing. If billable expenses are not tracked accurately or in a timely manner, then the cash flow for an organization is affected. And a choked cash flow affects the organization’s ability to purchase supplies, distribute payroll and more.
4. Revenue Recognition Complexities
Simply put, revenue recognition is the tracking and accounting of revenue, and it’s required by ASC 606 and IFRS 15. Complexities occur when project accounting professionals attempt to comply using manual and paper-based processes or utilize legacy software not rated for today’s revenue recognition standards.
What is Project Accounting Software and How Does It Solve Accounting Challenges?
In short, project accounting software provides specific project accounting features and functionalities. It enables service professionals to determine project costs, allocate expenses, compare budgets, assign resources, utilize multiple currencies and more.
With this in mind, there are a few ways project accounting software is the perfect problem-solving project accounting tool. For example, project accounting software gives service professionals complete visibility into their many projects. Any changes that happen are controllable from a single system, including creating the CORs and having all documentation in one location.
Having a 360-degree view of projects via project accounting software is a huge benefit, as is its ability to assist in the problem of inaccurate estimates. Project accounting software equips users with the ability to create project estimates within the software, assess profitability, create quotes, allocate expenses (including billable and nonbillable items), compare budgets and more.
Conclusion
Modern software designed for project accounting benefits professional services firms in many ways, helping them remove obstacles to their success and growth. Our guide, “Overcoming Project Accounting Challenges in Professional Services,” delves into the four key challenges in more detail and also reveals what happens when project accounting software intersects with a modern ERP solution like Acumatica Cloud ERP.
Project accounting software within an ERP solution—such as Acumatica Cloud ERP—seamlessly connects with the ERP’s General Ledger, Accounts Payable, Accounts Receivable, Sales Order, Purchase Order, Inventory Management and Time Management applications. Users have real-time access to company-wide data from any location, at any time via any web-enabled device.
Acumatica’s ERP and project management software provides users with:
- Total visibility into costs
- Complete control of billing
- Streamlined and flexible project accounting
Additional information about Acumatica’s project management and accounting software is available in the guide, which also explains how NexTec and Acumatica can help make project management a seamless, stress-free process.
Download the guide today to learn more about project accounting software and reach out to us when you’re ready for a demonstration!
About NexTec Group
NexTec Group is one of North America’s largest and most experienced technology consulting firms, specializing in industry-specific solutions for mid-sized organizations. For thirty years, NexTec has been a trusted partner to businesses, delivering, implementing, and supporting the core Enterprise Resource Planning (ERP) and Business Intelligence (BI) solutions they need to scale and grow.
With seasoned consultants from coast to coast, and a premium portfolio of innovative business management solutions including Acumatica and Sage X3, we help you get the most out of your technology investments. Our over 90% customer retention rate is a testament to the lasting, impactful relationships we build with our clients.
To learn more, visit www.nextecgroup.com or follow us on LinkedIn.
