Project Finance Management
Project finance management is a critical aspect of effective project management, as it focuses specifically on vital business metrics. Key areas such as budget consumption, revenue, cash cycle management, and project funding are essential to map consistently, to gain a complete picture of each project. Additionally, the right financial management protocols, risk and controls, and strategies can help increase transparency.
Having a robust project financial roadmap also ensures that projects are completed on time and within budgetary outlines. Key industries, such as the infrastructure sector, can face up to 60% of time overruns and 70% of cost overruns due to inadequate implementation of project management solutions. Project managers can significantly streamline pre-planning, execution, and risk analysis, by incorporating best practices in project financial management.
Selecting the right financial metrics
Project managers should focus on a few critical financial metrics that are essential to specific business cases. Revenue, operational costs, profitability, and earned value, can be tracked using a sophisticated project finance management software. A common pitfall that many project managers may face is the tracking of too many or all financial metrics, making decision making increasingly complex. By focusing on project-specific or business-specific financial metrics there is greater clarity obtained from project deliverables.
Integrating the right technology solutions
Financial management for projects is only effective when leveraging the right project financial management tools. These solutions allow enterprises to measure project profitability, revenue recognition, project funding, cost consumption, and a range of critical metrics seamlessly. Project managers can also gain a robust overview from project dashboards, while customizing the right metrics to track for their projects. The project portfolio can be fully mapped with a robust enterprise budget management software, with critical data visualization tools enabling managers to make agile decisions.
Focusing on project ROI
Project financial management needs to be highly focused on project return on investment, to be truly effective. Enterprises need to adopt the right strategies to focus on stage wise ROI while executing key projects. While close to 40% of global enterprise leverage a project management office and technology solution, about 19% of them deliver projects that are within time and budgetary outlines. By refining financial management focus towards ROI, projects can be executed in a leaner and agile way, driving better results for stakeholders.
Optimizing project financials regularly
Project financial plans are effective only when updated and optimized regularly. With new project scope changes, dynamic trends, and technology practices, project financials need to adapt to meet industry requirements. Updating project financial metrics regularly ensures that enterprises can accurately map evolving data metrics and focus on more realistic metrics that accurate reflect project progress.
Regular financial reconciliation
It is important for project managers to review invoices, payments, and regular financial documents frequently to ensure effective capturing of all financial data. It is also essential for managers to ensure financial compliance, in terms of budgetary consumption, overruns, and indirect costs that may arise during execution. By ensuring frequent reconciliation, managers can stay ahead of financial movement within key projects and make the right project decisions strategically with the right data at-hand.
Establish robust budget monitoring
Enterprise budget management is one of the main goals of any project financial management strategy. This includes integrating a robust enterprise budget management software for enterprises, as well as upskilling teams to using them effectively. While each project will have its own budgetary specifications, a robust technology solution can align key resources to manage budgets synchronously. Vital alerts and flagging systems can be instated, to ensure that overruns are minimized within the project scope. This can significantly streamline monitoring and ensuring that all projects are completed within budgets.
Managing budget revisions accurately
A key reason behind why many projects experience cost overspending and excess expenditure during its lifecycle, is managing budget revisions accurately. While communication is essential to ensure accurate information transfer, project managers must ensure that any revisions are captured precisely within the system. It can directly improve project financial management and align teams within the same budgetary parameters. Projects can be delivered on time and within set profitability parameters.
In conclusion
Project financial management is one of the most important concepts within the project management domain, as it integrates key actions, strategies, and teams, towards specific KPIs and goals. It also enables managers to make data-driven decisions with greater clarity and focus. Organizations can implement key technology measures to facilitate better financial management, with a stronger focus on ROI and project profitability. Product Dossier offers leading project management solutions that enable managers to have greater control over project financials.
