Screenshot of Gnucash Accounting software in a ledger for an account with sample data displayed

After reading about project management and business practices I slowly came to the realization that business practices, including accounting and project management, are built around the idea of optimizing manufacturing processes. Which makes sense, optimizing manufacturing processes is a simpler problem compared to optimizing service based services. A manufacturing line, once it's setup, has repeatable processes with a set output of items. Those processes can be analyzed and optimized to reduce cost and increase profits with predictable results.

For a project that is developing something new, such as software, technical manuals, or new products, there is no well-defined process for analysis. There are best practices for development of these items but each project has new and different aspects that affect the final product. Something needs to be created, which is very different from working with an existing setup of processes.

The design of accounting systems is also meant to support the tracking of costs and income for a well-defined process. When looking at standard accounting software that follows Generally Accepted Accounting Practices (GAAP), I've been puzzled about how charges for people are gathered for an invoice. Instead of gathering charges based on an individual, the charges seem designed to be captured through the use of generic category. While a particular group of people is associated with a labor category, it is likely that each person is paid a different rate. For parts, the same charge is used for each of the same type of parts. This means that using a common category won't capture costs correctly for an individual. Or the system will require an individual entry for each person charging to the contract. The grouping of items work pricing works best when working with parts and products, but not quite as well when invoicing for time spent on a project. It is a view that people can be grouped in the same way as parts or products. There are ways to customize this idea to work with services, but this customization is not intuitive and appears as a requirement that is tacked on to the base design of accounting.

Screenshot of Gnucash Accounting software showing the accounts used to track income and expenses


Based on my experience, I've identified some assumptions about this method of project management and accounting.

  •  All types of work can be mapped to business practices used to manage manufacturing
  •  There is little allowance for the setup of the manufacturing process, which may be different each time and only occurs once.
  •  Even if other types of projects and management are different from manufacturing, they need to fit into the model used for managing manufacturing, including accounting, project management and other business principles.

What I've observed of the reality of this type of management practice is the following

  • Projects can be made to fit this model but it creates extra work to manage the budget and project using these techniques
  • There are some best practices that can be used for managing one time projects but each project will have a unique character
  • These business practices view all items in the system like machine parts that are resources for assembling a final product or deliverable. Each item has a set of requirements and standards to meet for use in a product or process. For parts, these standards are things like dimensions, ability to function in different environments and expected life in use. For people the standards are school degrees, skills and certificates of study. With parts objective testing is performed to confirm they will meet the requirements. For people, who have similar skills and experience, there can be wide range in their performance depending on the type of project, management and coworkers they interact with. Simply, people are not as predictable as parts or products.
  • Management techniques tend to focus on managing large projects and a large range of skills sets. However, smaller projects managed effectively may yield a greater return on investment. An example of this is the software development. A relatively small team, 2-3 people, develops a product that fits in the palm of your hand yet it can be copied and sold for many times the initial development cost. Many project management techniques and accounting practices seem a better fit for larger teams with at least 10 people involved in the work. Which means the use of standard project management and accounting practices are likely to add to the costs of small project management. Using customized versions of project management and accounting for smaller projects can lead to improved efficiency and return on investment.

Gnucash Accounting software screenshot of a balance sheet with sample data

What If

In my time working on service oriented projects,  I've seen additional tools used that improve management and accounting during the development. While each project has a unique deliverable, there are processes that can be used in common to manage the schedule and budget.

  •  Recognize the unique qualities and role of each person on a team. When setting up a manufacturing line, there are usually clearly defined roles for each part of the process. There are also roles for management of the work, troubleshooting and maintaining the production and maintenance of the production line. For projects that are one-time, roles may shift even among people who have worked together on other projects. For example in technical writing a manual needs to be outlined, have text and illustrations developed, be edited and published with proper formatting and styling. If there are only two writers, these roles may shift between the two in different parts of the manual depending on their work load. They may recognize that one of them is better at editing and the other is better at outlining for the type of content. And if the writers are experienced with development of commercial manuals they may struggle with manuals developed to government standards. Because people can be flexible this can give the impression that job requirements only need to account for specific skills. The reality is that different people perform differently even when the same requirements are specified for the work. I wrote more about this top in my article "Theory versus Reality: Team Building and All of the Required Skills".
  • Communication and tracking issues. I've found that one of the most important things to do on one-time types of projects is to setup regular communication with the team and to track issues or action items. I like to have status meetings once a week with people to see how things are going. During these meetings I and the team identify issues and track them in some way. The most common way the issues are tracked is by using an Excel sheet. Issue tracking software could be used for larger projects. The key is to have an open environment where everyone is comfortable bringing up issues and working together to solve the issue or find a workaround. I've used this technique with teams there local and in remote locations and it seems to work fairly well. When it works, the first meetings are usually longer as issues are identified. As issues are identified and worked, the meetings grow shorter as the list also grow shorter. The agenda for the meeting is review of the action items, which keeps the meeting focused and to point. The team is encouraged to communicate in between meetings for issues that require additional discussion. The method of management
  • To keep projects within budget, create a break out of the primary budget and track those items. There is usually a budget for a project that is not to be exceeded. To track costs it can be easier to break out the budget and track those items. Standard project management techniques recommend this method for tracking costs and progress. The key thing that can make a difference is maintaining flexibility in managing the costs of each budget. If certain tasks finish under budget, the funds are shifted to other tasks that are running over budget. The goal is to be at or under budget for the entire project. By shifting budgets during the project it signals management confidence in the people and encourages them to report progress honestly. People will be encouraged to be part of the process because they know they will not lose resources if they are too successful. Checking on the budgets weekly, tracked as hours per person, encourages everyone to be vested in the successful management of the budget and successful completion of the project.

These are core techniques that the teams I've worked with have tailored to fit their project. The key is to monitor budget and progress in ways that encourage people to work together and communicate honestly about problems and successes. Even with these techniques not every project has gone as well as it could have.  I have seen that projects that don't use these techniques have had many problems and caused additional burnout and stress for the team.  I do think these techniques have helped and have received feedback that teams prefer to work with these types of techniques.

Pictures by J.T. Harpster, prints of selected photos can be found at our Redbubble shop

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