Accounting for jobs and projects is a key part of corporate accounting function. There are many situations where initiatives, whether or not they are purely internal to the organization, need to have income and expenses tracked against them. Depending on the complexity of the initiative, a job or project may be used.
Job Accounting
Jobs are generally used for short term, less complex situations. For instance, a home services business like a plumber may only be concerned with capturing income and expenses on a single day, for a single transaction. In this case, there may only be a few steps in the process. A scheduler creates a job, the technician adds merchandise and service charges to that job, then accounting reviews/approves.
This often doesn’t require much more than a few fields related to the job object in your accounting software. You mainly need that object as a means of tagging income and expenses as they’re entered into your software. Further, you can add in items for inventory management purposes, without adding too much additional complexity.
Project Accounting
Projects on the other hand, are a bit more complex. They typically have more moving parts and can last weeks or ever years. For this reason, project accounting is often used in the construction industry. Some considerations are:
- There are many different people involved, charging various labor rates.
- They have many different vendors involved, with different types of expenses, some of which can be capitalized.
- The fee earned on the project can be variable, based on project progress, fixed, or some mix of variable and fixed.
- Billing is rarely tied to revenue recognition, creating complex revenue recognition calculations.
For these reasons, we recommend utilizing job accounting unless it’s absolutely necessary to use project accounting. Accounting for jobs is much easier in your general ledger accounting software, allowing your organization to have a controlled, straightforward job accounting process. Remember, this is even applicable if you have light manufacturing processes and inventory tracking needs.
