What should be included in project administration?
Project accounting brings together the agreements, hours, costs and invoices of a single assignment. As a result, you can see what a job is supposed to yield, what you have already spent and how much work remains. Simply logging hours is not enough for that.
For a small assignment, a single overview with a fixed project code can be sufficient. For multiple ongoing projects, a link to your accounting system helps. The most important thing is that your quotation, hours, purchase invoices, changes and sales invoices recognisably follow the same assignment.
Distinguish between three questions: is the work profitable, what are you already allowed to invoice and what has the client actually paid? A project can be going well on paper while you are still waiting for money for months.
Start with a clear brief and budget
Before you start, establish what you will deliver, which parts fall outside the scope of the assignment, when it needs to be completed, and who is authorised to approve changes on behalf of the client. Also note whether you are working on an hourly basis, for a fixed price, or with a target price.
Estimate your own hours per task. For example, split preparation, execution, consultation and delivery. Also include directly attributable purchases and hiring. The number of productive hours is not automatically the number of hours you can charge separately to the client.
Fictional example. For a commercial project, a designer agrees on a fixed price of €4,800 excluding VAT. She budgets 50 of her own hours and €600 in direct external costs. For her own assessment, she calculates with €60 per hour. That internal calculation rate is a planning choice, not an extra billing item and, in the case of a sole proprietorship, not a salary for the owner.
The internal budget then amounts to 50 × €60 + €600 = €3,600. The headroom above that budget is €1,200. Whether that is enough also depends on general business costs, risk and the income the entrepreneur needs.
Log hours and expenses as you work
- Hours: date, task, duration and whether the time within the appointment is billable.
- Procurement and hiring: supplier, amount, supporting document and project code.
- Ordered but not yet invoiced costs: keep these obligations in view too.
- Progress: What is finished and how many hours and costs do you still expect?
- Invoices: invoice number, project term, amount, due date and payment status.
Write recognisable descriptions, such as ‘second correction round presentation’ instead of ‘activities’. That helps with a client query and with your next quotation. Use the same unit of time and prevent an hour from being counted towards two projects.
With deductible VAT, you generally assess project costs excluding that VAT. Non-deductible VAT does form part of the costs or investment. Use the same basis in your budget and actual cost calculations. You can read more about recording your time at time tracking for freelancers.
Consider also the future costs of the project
Halfway through the pilot project, 32 hours have been spent and €500 in external costs have been incurred. The designer expects another 24 hours and €200 in external costs. The current picture will then be:
| Section | Original budget | Spend | Still needed | Expected final score |
|---|---|---|---|---|
| My hours | 50 hours | 32 hours | 24 hours | 56 hours |
| Value of own hours at €60 | €3.000 | €1.920 | €1.440 | €3.360 |
| Direct external costs | €600 | €500 | €200 | €700 |
| Total internal budget | €3.600 | €2.420 | €1.640 | €4.060 |
| Space at a fixed price of €4,800 | €1.200 | — | — | €740 |
Looking only at the €2,420 spent gives an overly optimistic picture. Including the remaining work, the internal budget rises to €4,060 and the expected margin decreases by €460. This allows you to make adjustments during the assignment.
Do not confuse this internal calculation with the profit and loss account. The €3,360 for the owner's hours is not a payroll cost item for the sole proprietorship. After €700 in direct external costs, out of the €4,800 turnover, €4,100 remains for the owner's effort, general business expenses and ultimately profit. So that is not €4,100 in net private income.
Additional work: first the agreement, then the invoice
Needing more time is not the same as being allowed to invoice more. With a fixed price, a disappointing assessment of your own usually rests with you. If the client asks for something additional, describe the change and the consequences for price and schedule before you start.
Example of a change confirmation
For project [number], you are requesting an additional [concrete extension]. This part falls outside the scope of the commission dated [date]. The additional price is [amount and VAT treatment]. The delivery date will be [date]. Upon your approval, we will add this to the commission. Could you please confirm by email that you agree with this extension, price and schedule?
Keep the agreement with the project and only adjust your budget afterwards. An internal label ‘additional work’ or a line in your timesheet does not in itself prove a price agreement. Furthermore, protective rules apply to consumers. The explanation of ACM ConsuWijzer on additional work makes clear why the original price agreement and a timely warning are important. The sample text above is not a replacement for appropriate contract terms.
Invoicing and payments to follow
Include agreed payment terms in your overview: for example, a deposit, an invoice after an interim delivery, and the final invoice. Check what you are permitted to invoice according to the assignment and ensure you do not include a previously billed instalment again.
Keep outstanding invoices separate from work yet to be invoiced. Both can be on a project overview, but they mean something different. Approved additional work is also only paid once the money has been received.
Does a project run across the year-end? With work in progress, you must in principle take the profit as the work progresses; waiting until the final invoice is therefore not the standard. Make sure your accountant knows the progress, agreements and costs, and checks the applicable valuation rules. Read the explanation by the Tax and Customs Administration regarding work in progress.
Conclude with a short cost-benefit analysis
- Check that all hours, purchases and credit notes are linked to the correct project.
- Compare the original agreement with approved changes and the final invoices.
- Calculate how many of your own hours were actually needed and what direct costs were incurred.
- Note one concrete improvement for the following quote: an extra round of revisions, a more realistic hour budget, or a clearer scope definition.
Next, do not use only your most successful assignment as a benchmark. Also compare similar projects that required a lot of consultation, rework or travel time. That way your next hourly rate or price calculation based on your actual working method.
Frequently Asked Questions
Can I keep track of my project administration in Excel?
That is possible with a limited number of straightforward projects. Work with fixed project codes, input fields and a saved version of the budget. Check the reconciliation with your bookkeeping; a standalone spreadsheet does not replace invoices and other supporting documents.
Do I still need to log hours on a fixed project price?
That is useful for your own assessment. You can see how much time the agreed price actually takes and better budget a subsequent quote. Whether you need to account for your hours to the client depends on your arrangements.
How do I allocate general overheads per project?
For your internal calculation, you can choose an allocation key, for example a markup per hour spent. Apply this consistently and state the assumption. Do not book the same overhead costs again in your financial administration by allocating them internally to projects.
What do I do with a cancelled project?
Determine clearly what work has already been carried out, what costs and obligations exist, and what has been contractually agreed regarding termination. Then draw up a final account based on those agreements and the applicable law. The full quotation amount is not automatically always payable.
