From the conceptualization of a project to its implementation and the final outcome, companies are prone to encounter some of the most severe and complex issues, which requires the help of capable, talented, and specialized accountants in project management. Project managers spend countless hours on research and analysis of data, in order to gain an edge in the market and increase the company’s overall profitability. Financial accounting and managerial accounting are vast disciplines, where even the minutest of errors can have a massive impact on the ultimate ROI.
There are several tools that make life easy for project managers. From paid financial accounting software to Excel programming, these tools can often make a world of difference while analyzing data to make informed decisions. Project managers are also expected to have a thorough understanding of the various accounting principles so that they can generate financial accounts and statements that are in line with the generally accepted rules of accounting. Here are some processes by which accountants can generally analyze accounting data and come up with strategies to maximize the profitability of a project or an organization.
Research & Data Accumulation
The beginning of every project involves the collection of data from both internal and external sources. The data thus collected may consist of both past data and future predictions, which can help accounting managers to have a detailed picture of the requirements of the project. Research and data mining tools are only an integral part of financial accounting, as these kinds of software are not usually covered in the specialized context of financial management.
In simple terms, cost-benefit analysis is the evaluation of the business sense of an investment, or to determine if the cost incurred in a project can provide the desired benefits. Cost-benefit analysis, or also termed as cost-effectiveness analysis, enables project managers to make an informed decision based on the facts, rather than to invest in a venture that cannot yield the expected outcome. It also considers other factors such as break-even analysis, consulting costs, and other miscellaneous expenditure over the entire duration of the project.
Budget tracking may sound similar to cost-benefit analysis, but it is a totally different concept. While cost-benefit analysis is done before a project manager decides to implement the project, budget tracking is the process of managing the budget and expenses to meet the targets set during the planning phase. A project can involve multiple aspects of dealing with different strategies and courses of action, which means that the accountants or the project manager must stay within the budgetary limits that were set forward during the project planning phase.
Financial Forecast Analysis
Financial forecasting is the process of determining the cash flow of a project (both inflow and outflow), which provides a clear picture of the feasibility of the project. It takes into account the future income of the project in the form of sales and revenue, but the data acquired need not be accurate or representative of the actual figures. Financial forecasting is the trickiest part of project management, as the figures may not tally up during the course of the project implementation. Hence, the results and ROI can be drastically different than originally anticipated.
Financial accounting is an important aspect of project management. It is indeed the responsibility of the project manager to properly evaluate all the options and use the best software and tools to make a viable investment decision.