I wrote last month about the differences between project accounting and financial accounting. One of the big challenges of juggling the two is the issue of securing ongoing funding for your project over multiple financial years.
You know the situation: your project has a three-year lifespan but you’re only granted funding for Year 1. So you start the work, hoping that next year there will be funding available for you to continue.
Ideally, you should get capital funding put aside for all years prior to starting work, but in reality it’s not practical to tie up company funds like this when they could more profitably be used in other ways. So you might find yourself revisiting the project funding process every 12 months to secure the funding you need.
There are some advantages to doing this, especially as your financial needs may change throughout the project and you might not require all the funding you thought (or you might need to apply for more).
Here are some tips on how to secure continued funding for your project.
Know the Dates
If you know you are going to have to apply for funding for your project for next year, make sure you are clear on the budget process timeline. Talk to people who know what’s required.
One thing I have found over the years is that the planning cycle dates can change. One year it seems like we start in October, other years we’re scrabbling to do it all in December. So if you hear the message that the timeline isn’t firm yet, be aware that at some point it will be firm and you can still start planning right now.
Revise Your Estimates
You’ll get asked whether these are the latest estimates for your project. Make sure that they are! You should revisit your schedule estimates with your team so that you can use accurate dates and effort information to plan the costs.
Make sure you’ve been through any external costs as well, so that you know what, if any, capital expenditure is required above the funding for your team.
Create a Budget for the Next Year
You’ve revised your estimates – but you probably did that for the whole project, right? That’s not a problem, in fact, it’s good practice. But you only need to ask for the money that you’ll be spending in the next financial year.
Split out your budget forecast for the coming financial year. I believe you should submit the big picture as well so that everyone knows the total costs being requested over time (because this is as good a point as any to revisit the benefits in the business case) but make it obvious what part of the funding you require in the next 12 months.
Review the Benefits
The powers that be will pour over your request for extra money carefully. Remember, they’ll have lots of people asking for funding for new projects and operational expenditure. They are trying to juggle the needs of the whole company. So you need to make sure that your proposition is still compelling. They might just be looking for a reason to kill off a few expensive projects.
Revisit the business case. Talk to your sponsor. Garner some support from influential people around the right time – that kind of thing!
Make sure that if asked they can justify why the project should continue.
You should submit your rationale for continued funding along with the request for budget, but keep it short. The decision makers are going to be looking at hundreds of these. If they have a particular template they want you to use, then use it, otherwise a cut down version of a business case would do.
The next step is to apply for the funding when the time comes and then sit back and wait for the decision. While that’s happening you can plan ahead.
Make sure that you know when you are likely to hear the outcome of the decision. For now, assume that it is going to be a yes. With that in mind, you can plan how to mobilise the next stage of the project to ensure work can continue without a pause in proceedings.
It’s also worth having a Plan B for what happens if you don’t get funding in time for when you need it to continue. Sometimes it takes longer – I’ve known of businesses where funding for projects wasn’t released until three months into the financial year. That’s a lot of project teams not able to do very much while they wait for permission to spend the money to continue.
Think about what impact that would havve on your project. Could you carry on for a bit without spending any money, if you still had internal resource to work on your project? Would the worrk have to stop? Would you lose key resources from suppliers orr contractors if you couldn’t pay for them? All of this would have an impact on your ability to be able to complete the project successfully, so make sure that the decision makers know what the impact of a late approval would be.
Hopefully, all of this is built into your PMO processes and the ongoing needs of your finance team. Hopefully, there is good communication between your finance team and the rest of the business. Hopefully, the timetable is clear and you all know what’s expected of you. Hopefully this whole thing is a tick box exercise.
Unfortunately, the ‘tick box exercise’ scenario is rarely the case in my experience and you will have to plan, forecast and justify the continued existence of your project. This is not a bad thing. It’s robust business, financial and project governance. Go with it. Build time to do this into your plans and think ahead.