The Money Files

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A blog that looks at all aspects of project and program finances from budgets and accounting to getting a pay rise and managing contracts.

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5 Project Management resolutions with a financial theme
Categories: corporate finance, earned value, financial management, forecasting

It’s the time of year when project managers (and everyone else) are looking to make resolutions. You know, the kind of promises you make to yourself in the dark days of winter and then have completely forgotten by Easter.

On the off chance that you’ll be making resolutions this year, here are some you could consider. They all have a money-related theme, so if you want to brush up your budgeting or polish your financial management skills in 2013, these could be great resolutions for you to adopt. So here we go: 5 promises for better money management over the next 12 months.

1. I will look at historical data for forecasts

When you are managing projects that are repetitive in nature and that the team has a lot of experience of, it’s very tempting to simply let them estimate the length of tasks and assume that they know what they are doing. Most of the time, they probably will. But it is worth validating their estimates against historical data from timesheets and previous project schedules. Use your online project management software to pull up reports of how long things took the last time you did them.

This could be at the level of an individual task, like completing a particular piece of coding, or a project phase, like testing. Or both. The purpose of checking is to make sure that your estimates really are sound and that the people who are estimating are not making the same mistakes about task duration on every project.

2. I will do my timesheets in a timely fashion

This is a personal resolution for you, although you could extend it to all your project team members. The risk of not doing your timesheets on time is that you forget exactly what it was that you were doing. As a result, you block out 8 hours per day for a task called ‘project management’ which doesn’t give you any breakdown of how you actually spent the time. Worse, you could be booking time to one project when in reality you got pulled off that project to spend half a day on some other project. These things happen in real life, to you and your team members.

By aiming to complete your timesheets at least weekly you’ll not have long enough to forget what you were working on!

Training

3. I will understand Earned Value Analysis (or teach someone else how to do it)

If you don’t understand EVA, make 2013 the year when you get your books out and study how it works. If you do understand EVA, make a resolution to share your knowledge with someone else this year. Even if you don’t use EVA on your projects, it is a very useful skill to have.

4. I will do my expenses on time

Most project managers will incur expenses in the course of their job, such as travel to meetings. Not doing your expenses on time means that you are out of pocket. Many companies only pay expenses once a month in the monthly pay run, so don’t let your expense bill mount up – that’s effectively a loan to your company.

Get your personal paperwork in order by keeping receipts together, noting down your mileage after every trip and understanding the schedule for submitting expenses so that you don’t miss the deadlines.

If your expenses are being cross-charged to your project it is even more important to get your expenses in on time. If you don’t, your project budget will reflect that you have more ‘in the bank’ than you actually do.

5. I will review my budget quarterly

You do this already, don’t you? If not, make 2013 the year when you review your project budget forecasts regularly. If your project runs over two quarters you’ll probably be asked to do this by your finance team anyway, but even if you are not, it is still good practice to get out your spreadsheets and just check that you are still on track to stick within your budget tolerance limits.

Have you chosen any of these as your resolutions for 2013? If not, what are you having as your resolutions instead?

Elizabeth Harrin is Director of The Otobos Group, a project management communications consultancy. Find her on and Facebook.

Posted on: January 17, 2013 03:10 PM | Permalink | Comments (0)

3 ways expenses can pace costs
Categories: accounting, budget, financial management

ExpensesProject expenses aren’t always spread evenly throughout the life of a project. Understanding how costs are split is one way to make sure that your project budget is appropriately phased. For example, if you will incur more costs at the beginning, then you’ll need to factor that in to the budget. If you will pay out lots of money at the end, you need to factor that in as well, to make sure that you have some money left!

Here are 3 ways that costs can be linked to project activities.

Start of activity

Some projects incur the majority of their costs at the beginning. Examples would be:

  • Buying hardware like servers so that the rest of the project can use them for development effort.
  • Software licences that are required up front before you can start using the product.
  • Buying equipment or heavy machinery that enables you to produce the output of a project, for example if you are making widgets.
  • Buying a building for the project team to work in or a building for the project, such as a shop or work facility.

In this case, you’ll want to make sure that your project budget is available to you as soon as you start the project, and isn’t phased by quarter or reliant on some cash flow issue being resolved. You’ll need to spend a large chunk of your budget from day 1, so talk to your project sponsor or your project accountant and make sure that the provisions are available for you.

End of activity

Some projects incur costs at the end of the project. This could be, for example:

  • Paying a contractor in one lump sum for the work they have done, on completion of that work.
  • Paying for equipment retrospectively, if you have managed to negotiate a period of lease or free use until project completion.

In this situation, you’ll need to make sure that your project funds are still available to you at the end of the project. Finance teams often review budgets and if it looks as if you aren’t spending much of your project budget, they might ask for some of it back! It’s good to be able to justify why you need to hang on to the cash, so that you guarantee it is still available to you when you come to need it at the end.

Uniformly spread across activity

The third way that project costs can be linked to activities is through being spread evenly across the lifecycle of the project. Some examples of this are:

  • Paying contractors monthly.
  • Paying third parties monthly or regular service fees, such as for the provision of online project management software.
  • Subscriptions.
  • Property or machinery leases that require a regular payment, such as monthly or quarterly, in advance or in arrears.

This is probably the easiest type of split to manage. Regular payments for regular activities means that your budget will be consumed in an even way across the lifecycle of the project. You can quickly see if you are half way through the project then you should be about half way through your budget too.

Of course, one project could use all of these, as different activities could have different spreads of costs. You’ll have to take that into account when you plan how your budget is phased. If that is the case for you, you’ll also have to consider phasing per task/activity/item as well as what the overall profile looks like. That way you can build up a picture of how much money you’ll need when.

Which is the model that your project uses, or do you phase your project budget in a different way?

Posted on: October 21, 2012 07:39 AM | Permalink | Comments (0)

The Austerity Debate: What’s the cost of project management?
Categories: credit crunch, events, financial management

The cost of project managementAndy Murray, Director of Outperform, and lead author of PRINCE2:2009, spoke at the Austerity Debate at Lloyd’s Register in London recently about the role project management plays in this difficult economy.

When times are tough, senior management look to reduce costs and that sometimes means cutting projects and project management.  So how much does project management cost?  Murray explained that there several ways to look at this question.

The cost of managing a project

Each project has an overhead, including the cost of the project manager, the sponsor, a risk budget, the project board and any project support services.

The cost of failure

What does it cost if you don’t do projects well?  There’s rework, the cost of overruns, poor outputs, under-delivery, consequential loss, and benefits that remain unrealised.

The cost of managing projects

This is the infrastructure related to managing projects and includes any Centre of Excellence overheads, the PMO, support, monitoring, tools, evaluation, assurance, the Portfolio Office and audits.

Reducing these costs is possible, Murray explained.  He presented several options that senior managers could consider:

  • Reducing the number of projects
  • Reducing the cost of managing a project – giving each project manager more projects to run, for example
  • Reducing the cost of managing projects but minimising the central overheads
  • Reducing the cost of failure
  • Improving performance with better targets and delivering more benefits.


Andy's slideMurray said that the contribution project management offers is a mix of the value of increased performance, plus a reduced cost of failure and a lower cost projects, less the cost of project management itself.  I’ve represented this as a sum in the picture here.

In the last decade the focus has been on methods, training and techniques, Murray said.  There’s been no focus on behaviour, although he admitted that things have been looking up over the past three years.  There’s been a bit of development in the organisational space around P3O and strategic planning, but he believes we can do better.

What do you think?
 

Posted on: December 07, 2010 01:04 PM | Permalink | Comments (2)

Finance Filing: get your records in shape
Categories: financial management, records, tips

The holidays are over and we’re into the final stretch before the milestone of year end.  This is a great time to get your project financial records in shape and set up systems to help you breeze through the end of year demands from your corporate finance people.   Today I’m looking at filing systems.

A flexible filing system will help you feel more organised and on top of the financial details.  Your files can then easily be archived at the end of the project or handed over to the operational team.

You need:

  • Somewhere to store paper documents:  ring binder with dividers per project or hanging folders.
  • Somewhere to lock away paper documents: filing cabinet, lockable desk drawer etc.
  • A place to store electronic documents, preferably on a networked drive so if your PC or laptop breaks your files are not lost.  This networked drive should not be available to everyone.  Some (if not all) of your financial records will be sensitive, and should not be shared.
  • A method of scanning in paper documents for electronic storage.


Keep these in paper format:

  • Signed copies of contracts including appendices and amendments
  • Any insurance policies you have set up as part of the project
  • Escrow agreements
  • Signed copies of change control notifications to contract terms


Keep these in electronic format:

  • All the above – scanned in and stored electronically with the rest of your project files
  • Service level agreements and other contract appendices – keep paper copies as well.  The electronic records will be good for easy reference
  • Purchase orders
  • Invoices
  • Quotes
  • Contact details for Accounts Receivable, Account Managers and other key financial contacts at your suppliers


Shred these:

  • Paper copies of purchase orders and invoices – your corporate finance team responsible for Accounts Payable will also store copies, so you don’t need these
  • Paper copies of quotes, once you have stored a copy electronically


Be especially careful with these:

  • Financial records relating to project team members.  

If your project team members work for you, you’ll probably already have visibility of their salaries, expenses and bonus arrangements.  Don’t lump all this in with your ‘project’ records.  If the project team works for someone else who has asked for your input to their performance review to award a bonus, or you are responsible for their expenses or timesheets, don’t store this with the project records either.  Create a separate, private, ‘Personnel’ filing system for this type of sensitive record.
 

Posted on: September 08, 2010 04:32 PM | Permalink | Comments (0)

Read and win!
Categories: books, competition, financial management, news

Picture of hat on a pile of books

Want some help brushing up your project financial management skills?  Then take the Learn Something New Team Challenge from Safari Books Online.

All you have to do is use one of their books to help you deliver a project of your choice.  Send them the details of your project, the challenges you are facing and some information about the skills you need to do the project - project accounting, help with budgets or whatever.  Then look up what you need to learn on Safari and do it!  There are over 140 financial management books, and a load more on other topics.

The prize is an e-reader or a Starbucks espresso machine (I know which one I would rather have).  The downside is that the e-reader prize is only for a maximum of a team of four, so don't get too excited about being able to dish out iPads to your entire department if you win.

I have used Safari online through a corporate subscription and it is very useful.  In particular, when we needed to assess different software products in order to select the best fit for us, I found A Guide to Software Package Evaluation & Selection: The R2ISC Method by Nathan Hollander which was perfect for the job and a great help.

Essentially, Safari Books Online is an on-demand digital library that delivers thousands of books (and videos) from a variety of technology and business authors from massive publishing houses like O'Reilly and Microsoft.  It's not the easiest thing to read management and technical books on a computer screen, but if you are scanning a contents page for the section that might just save your project, it's certainly worth a look.

I'm not affiliated with Safari in anyway, but I thought this competition was something useful to share - the closing date is 9 August, so get your skates on!

Posted on: July 21, 2010 05:21 PM | Permalink | Comments (0)
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