Project Accounting for Capital Planning

Many businesses and companies have projects of varying degrees: opening a new healthcare facility, moving an online store to a brick-and-mortar building, etc. These larger-scale projects can be much more complex than simply creating a budget and sticking to it. Project accounting is a financial planning tool that helps to ensure that your project flows seamlessly from the brainstorming phase to the final execution.

During a project’s planning phase, a detailed budget plan must be created that not only tracks how much money can be spent, but how those finances will be monitored, tracked, and adjusted as needed. There are a few key concepts to this project accounting:

Documentation: Every cost, large or small, must be precisely documented for the best outcomes. This can include labor, legal fees, product, construction costs, etc. Receipts, frequent reports, and careful classification of costs helps to create a comprehensive picture of what has been spent, what is currently being spent, and what will be spent in the future. This also helps with consolidating costs and reporting to stakeholders.

Estimates: In the planning phase, estimates will have to be created for later potential costs. However, it’s key to consider how prices may fluctuate over time, and account for those changes in your budget and financial plan.

Timetable: Unlike in regular financial planning, project accounting is for a specified project that begins and ends. Therefore, the only forecasts, costs, expenses, revenue, etc. that are relevant are those within that timeframe. For example, if an organization is running a capital campaign and planning to build a new facility, the project accounting only involves the costs and expenses relevant to the planning, building, and transitioning timeframes, and doesn’t include 5 or 10 year financial plans that a regular financial planner may be concerned with.

Project accounting is critical for executing a client’s desired deliverable. This form of capital planning allows you to outline how much will be spent in each phase of the project, and creates necessary adjustments based on cost fluctuations and necessary project enhancements.

Strategic iQ is committed to providing precise, accurate, and thorough solutions for all your financial planning needs. From designing your planning system, to implementing it within your unique company, Strategic iQ can ensure your business runs smoothly and effectively based on careful analysis and can guarantee you’re prepared to tackle any tax provision hurdle you encounter.