Project Managers Must Understand Project Accounting

Project Managers are tasked with overall project planning and scheduling, resource allocation, project accounting, control, technical direction and ensuring compliance with quality standards to meet all deadlines and budgets.

All of that to say, project managers are more than superintendents who wanted to come in out of the field and work in an office environment.  Not to say that superintendents can't or shouldn't be brought in to the office, just to say that a person who is given the title of "Project Manager" needs to have all the traits and education of a true project manager.

Project Managers need to understand the dynamics of their project budget and the accounting including: 

• Project overhead costs,
• Corporate overhead percentages,
• Labor burden rates,
• Costs to operate equipment,
• Resources that will be used on the project from the corporate office (safety, O & M Manuals, Warranty Manuals, vehicle maintenance, Submittals, etc.)

Where I see the most revenue spent that is improperly tracked is labor, equipment and soft costs.  Project Managers must also consider the soft costs on the project including:

• Insurance (General Liability, Auto, Umbrella, Professional Liability, etc),
• Legal Costs and Fees,
• Financing costs,
• Engineering and Architectural fees,
• Pre-construction expenses including bid costs,
• Post construction costs and warranty items.

Project managers also need to understand the billing for their projects and be able to bill by percentage, amount complete and project for trades that will complete items by a specific day or date. Many project managers can tell you what is in place at the job site but have no idea what that equates to in project line item dollars.

Using a program such as Microsoft Project or Primavera Suretrak will allow you to not only keep a project schedule up to date but will also allow you to put dollars to those time lines which will change as your schedule changes -- as long as it is kept up to date.

Construction companies need to have regular accounting meetings with their project managers to go over the schedules, budgets and expenses of all projects to ensure customer satisfaction and company profitability.  Companies that don't have regular project manager/financial meetings will not survive when even 1 project goes bad.  

How long can a company survive with just 1 project that is behind schedule and costing them in extended conditions that are not reimbursed by a customer?   How deep are your pockets?

Charlene S Reed, Owner/Author

www.MyConstructionOffice.com

"Construction Administration Handbook"