What is Project Accounting Software and Why Do You Need It?

There are hundreds of accounting software solutions available in the market, at different price points and with different brand promises. 

You might wonder which one is right for you - or whether or not you should take on a project accounting software solution, instead of a general one.

It’s a relevant question, and one that deserves exploration. In simplest terms, general accounting software offers a broad view of a company's overall financial health 

While it handles essential functions like accounts payable, receivable, and payroll, it doesn’t have the capabilities you may need to manage the finances of a project, like resource allocation and cost tracking.

Project management accounting software specializes in the financial management of individual projects. It provides a granular level of detail, allowing businesses to track costs, revenue, and profitability at the project, phase, and client level. 

This focused approach enables more precise budgeting, forecasting and performance measurement. Let's take a closer look!

What Is Project Accounting and Its Benefits?

Project accounting is a specialized form of accounting that tracks all financial aspects related to a specific project. 

Unlike general accounting, which deals with the broader financial health of a company, project accounting focuses on tracking project costs, billing, and revenue.  

It provides project managers with the tools to monitor direct costs, overhead, and revenue, ensuring that the project stays on budget and financial goals are met.

Project accounting involves creating a detailed plan at the start of the project, outlining all anticipated costs, and setting up methods to track and manage these costs throughout the project's lifecycle. 

This includes monitoring expenses related to the project team, equipment, external services, and other resources.

Project accounting vs. financial accounting

So, how are the two tools different?

One key difference between the two is the time frame they focus on. Project accounting is concerned with the financial performance of a particular project within its defined timeline, whether it's a few months or several years.

 In contrast, financial accounting provides an overview of the organization's finances over set periods, such as quarterly or annually.

In terms of reporting, financial accounting follows generally accepted accounting principles (GAAP) and is standardised across the organisation.

Project accounting, on the other hand, is more flexible and tailored to the needs of each project. This could mean focusing on specific costs, such as materials or labor, depending on the project's requirements and goals.

Finally, project accounting offers the ability to customize processes to fit the unique needs of each project, allowing for greater flexibility and precision.

In contrast, financial accounting is governed by the Financial Accounting Standards Board (FASB) and must adhere to strict regulatory standards across the entire organisation.

How does project accounting work?

Project accounting works by establishing a budget at the beginning of the project and continuously tracking costs and revenue throughout its execution. The main components of project accounting include:

• Budget Creation: Outlining all costs associated with the project, including labour, materials, and external services.
• Cost Tracking: Monitoring actual costs against the planned budget and adjusting as needed to stay on track.
• Revenue Recognition: Determining when to recognize revenue based on the project's progress or completion.

Project managers and accountants use this detailed financial tracking to ensure that the project remains financially viable, making necessary adjustments to avoid overspending and stay within budget. You find more information about setting up your project accounting on our blog. 

Benefits of Project Accounting

Project accounting can steer your entire project towards success by providing real-time insights into its financial health..

By meticulously tracking costs, revenues, and project progress, project accounting helps you maintain control over your budget and ensures that your project remains profitable.

It enables project managers to monitor key financial indicators, such as completion rates, margins, and unbilled production, which are essential for making informed decisions.

With accurate project accounting, you can quickly identify any deviations from budget and take corrective action to mitigate risks

This level of financial oversight helps in forecasting future costs  and revenues, allowing for better planning and resource allocation.

Ultimately, project accounting ensures that your project is completed within the set financial parameters, contributing to its overall success and profitability.

These benefits can be felt in many different ways.

• More accurate financial data: Project accounting provides detailed insights into the financial performance of individual projects. This enables project managers to make informed decisions, ensuring that the project remains profitable and within budget.

• Better resource management: By tracking costs related to labour and materials, project accounting helps in optimising resource allocation. This ensures that resources are used efficiently, reducing waste and maximising productivity.

• Better budget control: With real-time tracking of expenses and revenues, project accounting allows for better control over the project budget. This helps in identifying any financial issues early, enabling quick corrective actions to prevent budget overruns.

• Better project planning and forecasting: Historical data from previous projects can be used to improve planning and forecasting for future projects. Project accounting provides a clear picture of costs and revenues, helping to create more accurate budgets and timelines for new projects.

• Risk identification and mitigation: Project accounting helps in identifying potential financial risks early in the project. By closely monitoring costs and revenues, project managers can anticipate issues that might affect the project's financial health and take steps to mitigate them.

• Improved decision-making: With access to detailed financial data, project managers can make more informed decisions about resource allocation, project timelines, and other critical aspects of project management.

• Transparency and accountability: Project accounting ensures that all financial transactions related to the project are documented and transparent. This increases accountability among team members and provides stakeholders with clear visibility into the project's financial health.

• Increased profitability: By closely monitoring and managing costs, project accounting helps in improving the overall profitability of the project. It ensures that all financial aspects are aligned with the project's goals, leading to better financial outcomes.

What Criterias Should You Look For When Choosing A Project Accounting Software ?

There isn’t a one-size fits all solution when it comes to project accounting software. Make sure that you evaluate the potential solution against your business goals, your software needs, and other criteria unique to your business:

It's essential to choose project accounting software that supports your company's financial and management objectives.

Business-Related Criteria

Understanding your business needs is paramount. The software should align with your management control requirements, helping you monitor and control project performance effectively. (Read more about this in our Management Control Article). Ideally, your project accounting software solution should :

• • Support your overall business objectives: Such as improving project profitability, enhancing resource utilisation, and delivering projects on time and within budget.

• • Meets your industry requirements: For example, industries like consulting, engineering, or construction might require specialised features for time tracking, resource management or compliance with industry regulations.

• • Fit your budget: Consider the total cost of ownership, including licensing fees, implementation costs, training, and ongoing maintenance.

• • Supports decision-making through analytics and reports: This includes insights into project performance, financial health, and resource allocation, enabling management to make informed decisions.

Don’t just focus on the features. It has to be a good fit for the company as a whole. 

Software-Related Criteria

Next, consider project accounting software integration requirements: 

Customization and scalability

Ensure the software can be customised to meet the specific needs of your projects and organisation. The ability to tailor the software to your unique workflows and reporting requirements is crucial. 

Choose software that can grow with your business. As the number of projects increases and their complexity evolves, the software should be able to scale without compromising performance.

Communication and collaboration

Your software should facilitate seamless communication and collaboration between finance, project management, and other departments. 

Project accounting software easy to use  ensures that everyone is aligned and working towards common goals. It should make it easy to communicate project financials through easy-to-understand reports to those who need it, including project sponsors and other stakeholders.

Integration with other systems

Look for software that  integrates smoothly  with other enterprise systems such as ERP, CRM, and procurement systems.

This prevents the creation of data silos and ensures a holistic view of your project finances. 

The software should maintain consistent and accurate data across different systems, reducing the risk of errors and ensuring all teams are working with the same information.

Extra Criteria

Finally, consider the criteria that will make it easy and efficient for your team to use: 

Cloud-based solution

Cloud-based project accounting software allows for easy collaboration, on-the-go access, and supports hybrid teams. This flexibility is increasingly important in today’s dynamic work environments.

Compliance for Data Privacy and Security

The software must protect sensitive financial data  from unauthorised access and breaches. It should ensure that data is regularly backed up and can be quickly recovered in case of a system failure.

Legally Fitted for Audits and Tax

Ensure the project accounting software complies with relevant financial regulations and standards (e.g., GAAP, IFRS).

This compliance is critical for audits and tax purposes, reducing the risk of legal issues.

Software Editor Services

Look for a software provider that offers adequate training to users, ensuring they can effectively use the software. 

Make sure that your project-based accounting software firm has support and customer service available, especially during the early implementation and adoption face..

Which Software Will Best Fit My Organisation ?

If you still aren’t sure where to start looking for a solution that can help your business meet its unique needs, keep reading!

Below, we explore the best project accounting software options for various industries and needs, whether it's tracking costs, managing resources, or forecasting revenue. 

Stafiz: The Best Project Accounting Software for Professional Services

Stafiz specializes in project management and team scheduling.

Their software platform is designed to help service companies, project teams, and consulting firms improve efficiency and growth in all areas, including finance and accounting. 

Here’s why Stafiz’s project management and accounting software stands out 

Accurate Cost and Revenue Management

Stafiz excels in cost tracking by offering distinct cost tracking for overhead and direct costs, providing alerts in case of cost overruns. 

This ensures that project managers can take corrective action before it's too late, keeping projects on budget and profitable.

Stafiz also offers accurate revenue recognition, crucial for both fixed-based and time-based projects.

The software allows firms to follow up on margins and project progress, ensuring that all financial aspects are aligned with the project’s goals

With these project accounting software features, professional services firms can confidently manage their finances, knowing that their project accounting is handled efficiently.

Project budget control

Budgeting is a critical component of project management, and Stafiz provides comprehensive tools for budget creation and editing.

The software allows for detailed forecasting to anticipate future costs and revenue, considering the current production levels.

This is supported by gap and variance analysis, helping firms identify and address any discrepancies between the projected and actual budgets.

Stafiz budgeting tools are designed to provide a clear and clear and actionable overview  of financial performance, allowing firms to stay on top of their financial goals and make informed decisions.

Resource and workload management

Effective resource and workload management are key to the success of any professional services firm.

Stafiz offers advanced tools to track resource utilization and allocation by project and employee. This includes monitoring underutilization and billable utilisation rates, enabling firms to adapt schedules and workloads to  optimize productivity.

The software also makes it easier to allocate budgets  when visibility on projects, tasks, and shared resources among multiple projects is clear. This comprehensive approach to resource management ensures that firms can maximise their workforce efficiency and project profitability.

Professional services companies choose Stafiz as their project accounting software for : 

• robust cost and revenue management ;
• comprehensive budgeting tools;
• advanced resource management capabilities.

You can also find out more about their workload management and project cost management tools online, or by scheduling a discovery call.

The Best Project Accounting Software for Other Industries

Construction: Procore

For the construction industry, Procore is a top choice for project accounting. It provides tools specifically designed for managing construction projects, including detailed cost tracking, budgeting, and resource management. Procore’s integration with various construction-specific tools makes it ideal for large-scale projects that require close monitoring of materials, labour, and timelines.

Healthcare: AdvancedMD

In the healthcare industry, AdvancedMD is a leading project accounting software. It offers comprehensive features for managing patient care, billing, and financial reporting. AdvancedMD is particularly suited for practices that need to integrate project accounting with electronic health records (EHR) systems, ensuring that all aspects of patient care and financial management are seamlessly connected.

The Best Project Accounting Software Options for Small Businesses

Striven

Striven is an excellent choice for small businesses due to its comprehensive project management features, including CRM, project monitoring, and real-time reporting.

The software provides insights into profit and loss, revenue tracking, and cash flow management.

Additionally, Striven offers automated accounting ledgers through bank recognition, making it easier for small businesses to manage their finances efficiently.

However, Striven does have a high learning curve and lacks integrations with other tools, which can be a drawback for businesses looking for seamless software integration.

Replicon

Replicon is ideal for remote and hybrid teams, offering automatic time recording  to speed up the billing process and enhance visibility over project costs

The software is mobile-first, making it easier for deskless workers to collaborate and for managers to plan future projects.  

Replicon’s revenue forecasting and configurable timesheets  further simplify project management for teams that operate in different locations.

While Replicon excels in many areas, it doesn’t track non-billable hours, which can be a limitation for businesses that need to monitor overall productivity and workload completion rates.

NetSuite

NetSuite is an ERP solution solution that includes project accounting modules.

It offers enhanced visibility with forecasting insights, separate revenue recognition from billing, and the ability to create, monitor, and edit projects  at the portfolio level.

These features make NetSuite suitable for large enterprises that need a scalable solution.

On the downside, NetSuite’s user interface is somewhat outdated, and the software is less customisable compared to other options, which might be a drawback for businesses with specific needs.

The Best ERP with Project Accounting Modules

Accounting Seed

Accounting Seed is a robust option for businesses already using Salesforce. 

It offers multi-ledgers for accounting, multi-entity and currency support, making it suitable for both small and large companies.

However, Accounting Seed’s usability is limited to Salesforce users, and its reporting features aren’t as customizable as those offered by other software like Stafiz.

The Best Project Accounting Software for Billing

Paymo

Paymo is a billing-focused accounting firm project management  software solution that integrates time tracking with billing, allowing businesses to bill by task users or create payment plans.

It also offers brandable bills through HTML code and direct email capabilities. 

While it’s an excellent project management software for accountants, Paymo can be expensive for smaller businesses and freelancers, and it lacks the ability to mass email invoices, which can be a limitation for growing businesses.

Zipbooks

Zipbooks is another billing-focused software that integrates with banks (mainly in North America) and auto-categorises transactions to save time.

The software offers features like income statements with key metrics, recurring invoicing, and the ability to see all transactions linked to a specific customer. 

However, Zipbooks lacks notifications for unpaid invoices  and receipt scanning capabilities, which are crucial for maintaining cash flow and budget control.

It’s one of the best project accounting tools for freelancers, but larger firms may want to look elsewhere.

Side-by-side comparison

When selecting project accounting software, it’s best to consider the specific needs of your industry. 

Stafiz stands out as the best option for professional services firms due to its comprehensive cost and revenue management, project budgeting, and resource management features. 

Other industries may benefit from specialised software like Procore for construction or AdvancedMD for healthcare.

Whether you are managing construction projects, running a healthcare practice, or operating a small business, selecting the right project accounting software is crucial for your success.

Project accounting software supports better resource management, risk identification, and decision-making. By providing detailed financial data, it helps businesses make informed choices and mitigate potential risks. The software also ensures compliance with financial regulations, providing a reliable and transparent financial record.

When choosing project accounting software, it's essential to consider both your business-related needs and software capabilities, such as customisation, scalability, integration, and data security.