Five steps to become a project accounting pro
A guide to the accountant’s role at each stage of a project’s lifecycle.
- Projects involve working outside a business’ normal operations and, as such, require a different approach.
- The planning stage for any project is vital, as is the initial business case for the project.
The project accountant is ultimately responsible for monitoring, measuring and reviewing progress through the life of the project.
Projects, by definition, are exceptional experiences in the workplace. Budgets can be high – and the stakes even higher – and internal politics sometimes play a part. But the benefits of working in a project team can be significant if you approach it in the right way.
“A project team can be an exciting environment for accountants to work in,” says Lincoln Tong FCA, Finance Director at payroll firm ADP Australia and New Zealand.
“The fact a project team is even needed reflects the reality that the organisation can’t achieve certain goals or aims through the normal means of operation,” says Tong. “So it follows that your way of thinking as the team member overseeing the finances needs to be similarly outside ‘business as usual’ and perhaps somehow less conventional.” To help accountants steer through the project lifecyle, Tong recommends the following approach:
Fundamental to any project is evaluating the business case for it in the first place. Here, Tong says, the foundation is a robust cost-benefit analysis. This should include calculations of return on investment and discounted cash flow forecasts.
“Whenever projects are questioned or tested later on – and they will be – everything always comes back to that initial business case,” says Tong. “And beware: you will be forced to backfill that piece of work if you didn’t do it properly upfront.”
Business Insights: Project accounting guide
The Chartered Accountants ANZ Victorian Corporate Advisory Panel shares more tips for project accountants in this Chartered Accountants ANZ guide.
2) Planning and set up
Accepting the adage ‘failing to plan is planning to fail’, the planning stage of any project is vital. For the accountant this involves, but is not limited to, creating the project accounting system, including a chart of accounts; determining what and how to report, including financial and non-financial key performance indicators (KPIs); and establishing a budget.
Negotiation is vital at this stage as you will be working with the in-house finance team(s), Tong explains.
“If you’re the designated project accountant, you’ll need to build a rapport with the regular finance team(s) to do things such as create a new cost centre or a new cost code and to set up a reporting system; as well as to obtain all the information you’ll inevitably need.”
It’s up to the project accountant to monitor and measure progress once the project is underway. This can be achieved by both regular reporting (to monitor routine transactions) and periodic reporting (covering accruals, prepayments, fixed-asset movements and depreciation, lease accounting and other period-end adjustments).
“Your regular reporting should reaffirm what you already know,” says Tong. “Or, at worst, it may highlight any problem areas on the horizon.
“Periodic reporting, by contrast, is more of a deep dive in so far as it tries to explain any variances, as well as their bearing on the project.”
4) Scope creep
“Some projects have the potential to become bigger than Ben-Hur,” warns Tong. “So from an accounting point of view, it’s important to work out how you might try and contain the project when it starts to grow too big.
“An unwieldy project can become a lot more difficult to handle in terms of reporting and governance, not to mention trying to keep track of what the original objectives were. CAs have the framework to keep every aspect of the project on track. To measure and monitor, and hopefully spot some of the early warning signs of scope creep.”
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At the conclusion of the project, the project accountant is responsible for closing the accounting records. Moreover, the accountant is in a very privileged position when it comes to contributing to a post-project wrap up.
“It’s very important that the project accountant gets the opportunity to feed into the post-implementation review of a project, as they can contribute learnings for future projects,” he adds.
“It’s difficult to prescribe a set formula for project success as every project is different. It is only through real-life trial and error that you often pick up some of the best learnings for the next project.”
The guidance in this article has been informed by members of the CA ANZ Victorian Corporate Advisory Panel, including Justin Lachal FCA, Charles McNeill FCA, Lincoln Tong FCA and Kevin McCoy CA.