Keep the records on paper? Electronically? Or shred them? This video will tell you what project financial paperwork you need to keep (and how) and what you can destroy.
Here’s a summary of what’s covered in the video.
During project execution you are putting your plan into action. Part of the monitoring and controlling of your project is to make sure that you understand how much work has been carried out so that you can work out the costs.
It boils down to two questions:
Armed with the answers to those questions you can calculate the additional cost, if any of completing the work.
During execution you may also be using earned value calculations, which are beyond the scope of this video today, but definitely worth a look if your sponsor wants a really detailed understanding of project performance.
As well as monitoring cost performance you can also monitor and control your risk response budget, review your quality efforts and costs and check that your resource planning is still accurate and you’re on track to deliver for the budget you set.
You’re likely to have to do some kind of course correction as it is a rare project that moves ahead perfectly to plan. This will involve handling change so you’ll be drawing on a change, contingency or management reserve budget or moving numbers around so that you can deal with the costs of change.
The biggest challenge during the execution stage is communication, and the authors of Project Management Accounting talk about that a fair bit. Without good communication you won’t have an accurate picture of project performance and you won’t be able to track and monitor any aspect of your project, let alone the budget.
You also have to work out what is the right level of detail to be sharing about your numbers – while you need all the detail your managers might not want that. If you don’t have a standard project management reporting template then you’ll have to make one up and getting the level of detail right could be trial and error as it depends so much on what your audience is interested in.
Tracking project financials is a really important part of the execution stage because it’s how many projects are judged – cost control is essential. Make sure you are spending enough time on it, and know enough about how to do it, to keep your project financials under control.
Project budgeting is one of the harder parts of managing projects, because the consequences of getting it wrong are significant. People tend to be more forgiving when it comes to delivering a little bit late or having to take shortcuts on the scope. But ask for more money or spend too much? That provokes strong reactions from project stakeholders!
I’ve made a short animated video about 3 of the more common budgeting mistakes that you might come across on your project: consider them things to watch out for.
Here's a summary of what the video talks about:
In the planning stage of the project you are working out all the project costs and building a resource plan against which you can track later.
Your wbs and the project schedule is really important when it comes to understanding your project budget. You need to know how long tasks will take and how much work needs to be performed before you start seeing a return.
During the planning stage you have to work all this out so that you can monitor against it during execution.
You also have to work out the other costs on a project. for example, the cost of the people doing the work in terms of salary or day rates, and other expenses like materials or equmpment.
There might also be a cost associated with procurement.
I’d also plan for risk in here too: you’ll want to know that your risk profile is covered and that you’ve got plans in place, and a budget to fund them, to address your major risks and current issues.
Finally, you’ll be planning for quality and including the cost of prevention, correction and warranty.
I’ve drawn my advice here from this book Project Management Accounting. I recommend it if you’d like to learn more about project financial management.
You first think about how much a project will cost in the initiation stage.
At project initiation, cost management and project financials are really about understanding. Understanding what you are doing and why, and how much you get out and how much you need to put in.
Firstly, consider whether it aligns to the organisation’s financial strategy, and whether it will create a suitable return. You’ll also want to work out how long it will take to get this return, or work with your financial management team to do so.
The project charter should include a description of the financial success of the project and how it will be measured.
You’ll use these as the success criteria for how the project will be judged on financial performance at the end.
You might be able to add costs to any risks mentioned at this point in the project charter.
The tips here are all discussed in more detail in this book Project Management Accounting. It’s a great primer on the financials relating to projects and it goes into a lot of detail so it’s handy for beginners and those with more experience.