Relating Accounting to Career Goals

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Financial Literacy and Construction Management

Financial literacy is important not only in everyday life, but also in achieving professional goals. I am currently completing my Bachelor of Science degree from NYU Tandon School of Engineering in construction management. I work as an Associate Project Manager for Two Trees Management, a real estate developer, and I am currently managing the Domino's Sugar Refinery development project in Williamsburg, Brooklyn. My future career should continue in the field of construction management, especially real estate development. I know that mastery of accounting is essential to my chosen career path, directly or indirectly. Below is an analysis of how accounting relates to my chosen career path which is in construction management.

The Role of Accounting in Construction Management

The eventual financial success of any construction manager or contractor depends on several factors such as the quality of their product, their reputation, and how they manage the enterprise. A financial contractor's success also depends on disciplined project management that is basically connected to a sound financial and accounting system. These two aspects, when well coordinated, occupy a significant part in the financial success of any construction contractor. This relationship needs these two aspects to efficiently communicate and collaborate over the estimation, forecasting, cost accounting, recognition of revenue, and cash flow procedures.

Estimation Process

The estimation process is crucial to a contractor's success given that the execution of a project begins with the initial estimation of the project's cost, and how the costs are going to be funded. Reliable cost estimates offer a baseline for the monitoring of project progress as well as financial performance evaluations all through the duration the project is underway. Simply put, the project management job is accountable for project estimates; a clear indication of the importance of accounting in this field.

Forecasting

Forecasting refers to the action of focusing on future events like costs, billings, and potential project challenges. For a project management to efficiently make forecasts, accounting controls and proper project management ought to be in place to make sure that the forecast information available is actually accurate. These forecasts are useful in other processes such as revenue recognition, job costs, and cash flows.

Management of Job Costs

Management of job costs needs extensive cooperation between accounting and project management. The accounting function is accountable for the development and maintenance of a chart of accounts featuring cost codes which project management can utilize in managing and forecasting the project effectively. Additionally, accounting and project management should work together to ensure that labor hours are correctly approved, coded to the right project, and also calculated for the right amount. The process of revenue recognition, on the other hand, totally depends on three processes discussed above (estimation, forecasting, and cost accounting) functioning well.

Cash Flow Process

The cash process is the heart of any company and all of its construction projects. It requires the accounting function to collaborate with project management in the preparation of client bills, recording these bills to the accounting system, and in the collection of cash receipts from the client. The cash flow process is simply an indicator of how well the project was estimated in the beginning and afterwards forecasted.

Conclusion

In conclusion, disciplined project management accompanied by a sound accounting function is important to a construction contractor/manager. The relationship shared by these two functions in the estimation, forecasting, cost accounting, recognition of revenue, and cash flow processes contribute to the success of any construction contractor.

March 15, 2023
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Business

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