Portfolio Accounting

Andy Jordan is President of Roffensian Consulting S.A., a Roatan, Honduras-based management consulting firm with a comprehensive project management practice. Andy always appreciates feedback and discussion on the issues raised in his articles and can be reached at [email protected]. Andy's new book Risk Management for Project Driven Organizations is now available.

  Cost Management   Portfolio Management  

I think that I may have lost my mind. I’m sitting here starting an article about budgets and finance. I’m not sure which makes me crazier--the fact that I am about to write this article, or the thought that you may actually want to read it. Most project managers I know hate managing budgets--we aren’t accountants and the budget stuff needs experts. If we are lucky, we have a finance representative on our projects to manage that stuff.

But at the portfolio level it’s not that simple, and financial management is a key skill for portfolio managers. I’m not an accountant and I don’t pretend to be an expert on the money details, but I have seen what can happen if the money isn’t managed properly. In this article I want to offer some thoughts on how portfolio-level budgets should be planned and managed.

The basics
An organization has a fixed project budget. That number may be in the tens of thousands or it may be in the hundreds of billions--but in any given year there is only so much money available for investment into the project portfolio. Additionally, the discretion as to what to spend that money on is further reduced by previous decisions (commitments to multi-year projects from earlier years where effectively the money has already been spent and just needs to be allocated from this year’s budget) and “must do&…

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