Analyze the project lifecycle (project phases)
Project management and accounting can be divided into four phases:
You can review the phases in the following process flow, which is aimed toward external projects, or projects that are completed for one or more customers. It also applies to internal, cost-only projects.
In the initial sales phase of a project, a project quotation lets you provide a customer with a non-binding offer. A quotation can include the following elements:
- the items and services that are quoted
- basic contact information
- special trade agreements and discounts
- possible taxes and surcharges
During the initiation phase of the project, it is assumed that the sales cycle is complete, and the customer has accepted the contract. You can use a project quotation to communicate the estimated labor, expenses, and materials to the customer. The project contract allows you to record the billing terms, limits, and agreements. A work breakdown structure (WBS) allows you to plan and estimate the work. You can set up forecasts and budgets to guide the project execution.
When initiating a project, you can:
- Create project contracts that you can use to invoice customers.
- Create work breakdown structures (WBS) to track work progress and cost.
- Create project forecasts and budgets.
- Create projects that are based on your needs.
- Assign workers, categories, and resources to projects based on skill and/or availability.
The following illustration shows the structure of a project, including the relationships between the project, team members, planning, documentation, cost, and revenue transactions and financial posting.
During project execution, team members or managers record work and the expenses that are incurred by using timesheets, expense reports, and other business documents. Project managers have tools that let them monitor the consumption of budgeted amounts for the project. Project managers can also order, pick, or procure materials for projects by using purchase orders and other business documents. Invoices are prepared and approved so customers can be billed for ongoing work. Finally, revenue is recognized during this process to affect the organization's financials.
At its most basic level, a project is used to group transactions that record costs, and then to post these costs to the general ledger.
Generally, these transactions are the result of business documents, such as time sheets, expense reports, vendor invoices, or inventory transactions. The lifecycle of a project usually starts with estimates, forecasts, and budgets that help plan and anticipate the work and financial impact of the project. As you analyze a project, you can evaluate not only the transactions that occurred during the project, but also the accuracy of your estimates and forecasts, the utilization rates of the project team members, and the overall success of the project.
The remainder of this module will focus on the sales and initiate phases, while the execute and analyze phases will be covered in the next module.