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Monday, 28 February 2011 10:51

Project Accounting: A Critical Component of Successful Business

Written by  Curt Finch
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Project Accounting is a critical concept for today's business world, yet most businesspeople do not know their project accounting data.

For the last 29,950 years, our hunter/gatherer and farmer ancestors have always understood their costs of production. Why is it okay that in the last 50 years, nobody does anymore? It's not.

Project accounting for the hunter/gatherer is easy. The ROI is easy to calculate and it's intuitive. And if the ROI isn't good enough, a harsh environment will make sure you don't make that mistake very long because you'll be dead. Farmers invented accounting - eventually double-entry bookkeeping - which many people argue is the basis for civilization because it enabled the measurement of and accumulation of capital - without which no progress is possible. Today, knowledge workers work with knowledge and information instead of with stuff. Accounting for knowledge work is different.

How is accounting for knowledge work different? For a hunter, he can count how many fish he caught. For a farmer, how much corn he produced. For a manufacturer, how many cars came off the line. But for a knowledge worker, the production is much more cloudy. Much less clear.

Time spent is one of the metrics you can use. It's not perfect but it is universal. It is one proxy for production. And it's a very relevant one.

People businesses, like software companies and architecture firms, don't track employee time to minimize break times, if they track time at all. They do it to understand costs and automate billing, and to a lesser extent, to track salary, paid time-off, or to pay hourly knowledge workers correctly. These areas are rife with potential SOX compliance issues. The rise of the people business is challenging news for payroll and HR executives - and it makes their function more critical than ever.

The future is about innovation. It's all about finding new ideas. The past was about counting your chickens, or your catch for the day.

Curt Finch is the CEO of Journyx in Austin, TX.

Read 5963 times Last modified on Sunday, 10 April 2011 16:12
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