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How are you currently managing your project budgets? Are you using MS Project? MS Excel? Or are you using something else?
"Color of money" is a potential issue. I am by no means a finance expert, but different projects may have different accounting requirements. For example, in the US, there are different tax implications for expenses when a project is still in a development phase, than when customers are signed up and the project is generating revenue. I would get accounting and finance specialists involved.
thanks a lot for your quick response. I haven't been thinking about IT related issues yet.
My question is rather a foundational one. We receive funding from different donor organizations for the implementation of different projects. We have to finance the purchase of a new car for our mission that will be needed for all these projects. However, as per guidelines of our sponsors, we don't have the possibility to fund the vehicle entirely via one project only. So, I have to become creative and figure out how I can split these costs proportionally among all projects and how to 'sell' the respective cost lines to our sponsors. From project to project the car usage may differ quite a bit depending on the need for transportation.
I hope this explanation sheds more light on my question. Thanks!
thanks for your thoughts on this. Never heard about the term 'color of money'. Can you please explain a little bit further what do you mean by this? I am sorry but as a German I sometimes struggle with some English terms ... :-)
Color of money is a term used to describe different categories of expenses such as R&D vs. production, and labor vs. materials, that are treated differently by accounting/fiance. An example would be how capital expenses like a car lose value over time, and that depreciation is written off on taxes as a loss.
Because they are treated differently, they must be handled separately. You can't "mix money of different colors", meaning if I don't have any money left in the budget from labor, you can't take money budgeted for capital expenses, even though it's going to the same project. There a number of situations where the accounting policies require keeping budgets separated between different parts of a project, or between different projects, like if you accounted for the car under one project, but used it on several projects.
You can split it based on percentage use of the vehicle, for example by miles driven associated with each project or the number of days/hours when the vehicle is used for the project. You can split it among few projects as needed based on your estimates. Also check online for cost allocation accounting models. It will help to see other cost allocation basis ideas.
Hope this helps.
thanks for the good advice!!!
thanks for the clarification. Much appreciated.
Your car can become part of your overhead, just like an office would be. An accountant would work it out for you.
that sounds also very appealing to me. Thanks!
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