This question is posed to me on a fairly frequent basis when I am working with accounting personnel for construction industry clients.  The question arises when it is determined that the total estimated cost, or contract amount, provided by a project management turns out to be incorrect.

For many years my response was to quickly blame the project manager for either being lazy or not understanding the importance of accurate job cost projections.  Experience has taught me that there is another source of the problem that I was hesitant to accept.  The problem rested with me and the accounting personnel for not asking the right questions of the project managers.

Why is this so complicated?  The project manager just needs to give me a contract amount and the estimated total costs.  The problem arises due to poor communication between us as accountants and project management.  There is a wealth of information we have in accounting that is not readily available to project management.

An example would be asking the project manager to give us the cost to complete on a particular project so we can complete the December financial statements.  We know that we need the cost to complete based upon the cost that were in our accounting system at December 31.  However, the project manager could give us the cost to complete from the day we asked them the question or from the date that they next run a cost report.  Either way we would get the wrong answer even though the project manager made a diligent attempt to answer our question properly.

The moral of the story?  Accountants are responsible for asking clear and detailed questions to make sure we are getting what we need for an accurate financial statement.  General questions which are easy to ask lead to unintended wrong answers.