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5 Key Ways To Get Project Costs Under Control

You need to understand your project accounting costs to see how truly profitable your company is. This knowledge isn’t lost on companies as they seek to understand these costs and the data surrounding them. This effort enables companies to identify financial issues early, and correct them before they become a problem.

As an article on Ecommerce Times points out, the focus on understanding accounting costs isn’t just about constantly looking at costs; it’s about measuring profit margins. It’s more than volume discounts and cost overruns or properly managing inventory.

Field services firms need to track historical data so they can go back and validate their profit projections. They need to make sure these projections are correct and look for ways to more accurately create these projections.

The overarching idea is that firms validate the margins of the different parts of a project and use that data going forward to set up new projects. In essence, they’re using what they’ve learned to do the next project better.

The Ecommerce Times article lists five ways to manage project accounting costs accurately:

  1. Understand that time is money: Tracking payroll, billing, project management and strategy costs is important to balancing costs.
  2. Use key performance indicators to measure intermittent success: KPIs measure an organization’s progress toward set goals. KPIs can make a huge impact in a positive way when monitored and applied correctly.
  3. Estimate accurately and adhere to your estimates: Many companies don’t handle their bidding process well. By using the formula [(E-A)/E] (E = estimated hours to complete project, A = actual hours) companies can accurately plan future projects.
  4. Quality data in = quality data out: In order for project accounting costs to be accurate, the data put into the system has to be accurate. It’s imperative that all employees follow this mandate.
  5. Limited visibility: Administrators should be handling data entry to ensure costs are measured correctly and the data remains accurate.

Source: Ecommerce Times, September 2012