Managerial Accounting, Applied to Successful Project Management Accounting Practices
1.1 Introduction to Managerial Accounting in Project Work Environments
This paper provides research and pertinent Managerial Accounting strategies that support the overall financial goals of project management professionals within the context of project management work environments. Many industries rely on project management as an important part of a successful business strategy. Project managers are under extreme pressure to plan and respond effectively within the context of a fast-paced project environment where the budget has the potential of changing multiple times. Within this context, it is the project manager’s goal to not only maintain control over the budget, but also plan, execute and control schedules, scope, risk and quality.
There is also a growing emphasis on a project based work environment for today’s management accountant. The emphasis on project-based work creates a growing need to integrate managerial accounting analysis into the project environment. This also means that there is an increased need for managerial accountants to develop a familiarity with the unique requirements and demands associated with the project work environment (Liberatore, Stout, & Robbins Jr., 2007).
Project Accounting is the managerial accounting practice of creating financial reports specifically designed to track the financial progress of projects; assisting project managers and senior management in making appropriate financial decisions.
Project managers come from a wide range of backgrounds and often begin their careers as specialists in their chosen profession; gradually moving into project management roles. Considering many project managers come from areas of expertise outside of the functional business world and most do not have formal business or accounting training, it is essential that project management professionals develop these managerial accounting skills.
Project management accounting, budgeting, tracking, reporting costs and profitability are all skills that help senior project managers in understanding project performance as well as how this performance relates to the strategic goals of the organization. Senior project managers not only need to understand the methodology and techniques of the project management profession, but they must also understand the business context of how their projects fit into the overall goals of the organization (Callahan, Stez, & Brooks, 2011).
Project management professionals need to understand how expenses and income affects the general ledger. In addition, to succeed in the complex and competitive business environment of project management, the project management professional also needs to understand how to budget resources, determine ROI, and track expenses and costs (Callahan, Stetz, & Brooks, 2011).
2.1 Unique Characteristics of Project Accounting vs. Functional Organization Managerial Accounting...