Product-based accounting software and project-based accounting software are two distinct types of accounting software with different functions and capabilities. Product-based accounting software focuses on the financial management of products and inventory, while project-based accounting software focuses on the financial management of projects.
Product-based Accounting Software
Product-based accounting software is most commonly used by businesses that sell products or services. This software allows businesses to record financial transactions related to the purchase and sale of products or services, manage inventory, and generate financial statements.
Why integrate it with Inventory Software?
Accounting software has a limited understanding of inventory tracking. This type of software is usually integrated with an inventory management system, allowing businesses to keep track of inventory items and their associated costs. Product-based accounting software is a great tool for businesses that manage a large number of products and need to keep track of their costs and profitability.
Project-based Accounting Software
Project-based accounting software is most commonly used by businesses that offer services, such as consulting firms or professional services organizations. This type of software is designed to track the financial performance of projects and allows businesses to record the costs associated with a particular project, generate invoices, and keep track of project progress. Project-based accounting software is a great tool for businesses that need to manage multiple projects and need to keep track of their expenses and profitability.
Why integrate it with Inventory Software
A business that sells a project, even when it involves selling its product, is often tracked by the job, a.k.a. contract or project. They still need inventory software. Let’s consider an example:
Government Contractors
A very specific industries where this is often the case is with government contractors.
For example, a company might win a contract to build something or provide an invention to the Department of Defense. A fun one to think about might be a company that has invented specialized weapons or structures. These can be understood as projects that require strict financial tracking and product tracking. They could be installed at a designated site.
Government contractors must provide detailed information about how they are handling the purchases of both the project and inventory purchased by the government. The project must remain within the bounds of what the government agency has allotted and within the bounds originally allowed; no surprises nor charges unaccounted for.
The overall benefit for these companies
Integrating project-based accounting software with an inventory management software can be especially beneficial for businesses that offer both products and services. This integration allows businesses to track the costs associated with both the production and sale of products, as well as the costs associated with the completion of projects. The integration of these two systems makes it easier for businesses to monitor their financial performance and make informed decisions about their operations.
Not to mention, when a project cost needs to be amended to reflect any changes in assigned products and parts associated with it, inventory software comes in handy, to say the least. This type of data is critical to government contractors. It can provide the records required to share with their accounting team as well as customers. It is highly advantageous to know the difference between inventory still owned by the company versus the on-hand inventory that actually has been allocated and therefore owned by the customer.
Conclusion
In conclusion, product-based accounting software is most commonly used by businesses that sell products or services, while project-based accounting software is most commonly used by businesses that offer services.
Integrating project-based accounting software with an inventory management system can be beneficial for businesses that offer both products and services, allowing them to track their costs and profitability more effectively.
Flowtrac specializes in being that inventory management software arm for product as well as project based companies. For example, government contractors have benefited from implementing the inventory tracking packages we’ve designed specifically for them.