Architectural accounting falls under the auspices of the “management” accounting branch that consists of government accounting, public accounting, internal auditing and management accounting. Construction firms, engineering firms and architectural firms all use a subset of management accounting called project accounting. Architectural accounting involves project management and includes estimates, bids, time and materials billing, and job cost tracking that provides a snapshot of project activity at anytime during the project's movement.
Architectural accounting software is made up of stand-alone modules that feed entered data into the general ledger system that generates the needed financial or management reports. Each module works independently and allows for the generation of reports from it to verify accuracy of entered data and provide needed information to managers. Modules in architectural accounting may include “Billing,” “Contracts,” “Job Cost and Tracking,” “Accounts Payable,” “Budget,” "Estimates and Bids," “Accounts Receivable,” “Payroll,” “General Ledger,” “Reporting” and more.
The “Job Cost” module integrates with the “Contract” module and provides a means to compare the original estimated prices, contract prices agreed upon with the actual income and expenses generated for the contract, project or individual job. Architectural accounting also captures data based on time and expenses. Architects often travel to project sites to verify that designs fit aesthetically and physically into the property. Travel costs and related expenses, along with service time post to the “Job Cost” module after being entered by the accounting department.
With reports created from the system after all the data is entered, managers can review reports to verify the profitability of the project and make adjustments, if needed on pricing for future projects. Using architectural accounting software allows an architectural firm to view all the costs associated specifically with the project and realize any areas needed for improvement. It also allows the firm to track the billable and non-billable expenses, and spread non-billable overhead costs against all projects in the system for an accurate measure of company profitability.
Service-based businesses such as architectural firms rely heavily on retaining existing clients and attracting new ones. With architectural accounting practices and software in place, reports can be customized for the client to show him all the individual costs of his projects and helps him when planning construction and design needs in the future. This provides an added tool for marketing efforts when attracting new clientele.