Lately, project accounting has been a frequent topic on the BQE blog. It’s the practice of tracking the financials of each project (a.k.a. engagement, job, etc.), and it’s essential for increasing your professional service business’s profitability. While we’ve explained its importance from our own expert angle, it’s time to take a step back and look at the state of project financials on a bigger scale. These statistics will illuminate how the professional services industry as a whole fares in terms of budgets, profits, goals, and software.
Unfortunately, many projects don’t meet their goals in terms of both budget and schedule. These statistics will give you a look at how widespread issues like budget overruns and scope creep really are.
- 34% of projects have no baseline (Wellingtone).
- Out of every $1 billion invested in projects in the US, $122 million is wasted due to poor performance (Project Management Institute).
- The average cost overrun of an IT project is 27% (Harvard Business Review).
- In the AEC industry, projects go over budget 18% of the time (Zweig Group).
- 80% of project managers don’t know how their projects align with their firm’s business strategy (Capterra).
- Only 28% of businesses use project performance measurements (Project Management Institute).
Data Capture Pitfalls
Project accounting is impossible without capturing data about time and expenses, billing, and accounting. Unfortunately, many professional service firms don’t have good practices when it comes to tracking these numbers.
- Businesses see “capturing time/costs against projects” as their biggest challenge in the realm of project management (Capterra).
- Almost 40% of respondents to one survey said they never track time spent reading and answering email, and 15% rarely do. Only 33% said that they track time spent on email “always” or “often” (Harvard Business Review).
- Since the average professional services firm charges $150 per hour per employee, the above statistics mean that businesses are losing $52,500 annually per employee due to not tracking time spent on email (Harvard Business Review).
- Moreover, 20% of service professionals don’t track time spent in meetings (Accelo).
Project Accounting Software
As we’ve discussed, the ideal project accounting software combines data capture for time and expenses along with billing in addition to project management and accounting. With all these types of data on one platform, it offers business intelligence that makes running a project-based business easy and profitable.
- 44% of SMB use manual methods for project management, and 7% don’t use anything (Software Advice).
- The top three most most requested project management features are task management, reporting, and time and expense tracking (Software Advice).
- 94% of project management software buyers want project tracking tools like reporting, dashboards, and Gantt charts (Software Advice).
- First-time project management software buyers cite a need for automation and error reduction as their top reason for evaluating these solutions (Software Advice).
- In terms of financial management software, QuickBooks is the leading financial solution for small and medium sized professional service firms, with 13.5% of survey respondents using it. However, SPI expects the QuickBooks market-share to sink as cost effective solutions come to market with the project accounting functionalities that these firms need (Service Performance Insight).
- Indeed, 35% of accounting software buyers who are using an existing software are looking to move on from QuickBooks (Software Connect).
- 43% of these accounting software users are looking for increased functionality (Software Connect).
- While those accounting software buyers are savvy, a whopping 21% of small businesses in the US haven’t integrated their accounting solution with an invoicing and payments platform (CPA Practice Advisor).
- However, 53% of CEOs and CFOs think it’s “important” to integrate accounting with invoicing and payments (CPA Practice Advisor).
- When businesses use one platform to manage projects, time and expense, invoices, business reporting, and the like, they see significant differences in comparison to companies that don’t use this type of software. Their revenue growth is 67% higher, while their project margins are 25% bigger (Service Performance Insight).
- Meanwhile, businesses that automate reports see an average ROI of 188%. Those that use analytics to improve decision-making see an ROI of 389%. Firms that deploy business intelligence and project accounting analytics throughout their organizations have solution ROIs of 968% (Matillion).
These statistics illustrate the importance of proper project accounting procedures and technology. Firms that standardize their practices, track their data, and use the right tools see impressive benefits in terms of utilization, profitability, and other essential success metrics.