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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Why You Don’t Need Money to Have a Successful Project

What’s the difference between a stakeholder and a supplier?

How to Prepare for a Project Audit [video]

What’s the Difference: Tech PM vs. Service Delivery Manager

3 Ways To Keep Your Project on Budget

Why You Don’t Need Money to Have a Successful Project

Categories: budget, success factors

This month it’s all about celebrating project success here on ProjectManagement.com, and with that in mind I wanted to explore some ideas around what makes a project successful.

Malcolm Gladwell has been instrumental in shaping my thinking about this, and you can read more of how I got to know of his work and his thoughts on the paradox of successful cultures in this article.

Often times, we rely on the old adage: “Fast, good, cheap: pick any two.”

The assumption here is that if you don’t pick ‘cheap’ and you have plenty of money to invest in your project, then you’ll get a successful outcome. We also hear leaders talk of being able to throw money at a problem.

Don’t get me wrong. Having money to help resolve issues and to fight off potential problems is a huge benefit. Funding does make many issues seem less troublesome. When you can call in extra resources or buy more stock without worrying about it, that’s definitely a burden removed.

The thinking of Gladwell, author of Blink and Outliers, suggests that successful cultures aren’t the ones with the most money to throw at problems. Success doesn’t come from unlimited funding.

Borrow and Follow

Successful project cultures are those that rely on the ‘borrow and follow’ approach that Gladwell laid out at the PMI Global Congress North America in Dallas where I heard him speak.

Those project management cultures don’t innovate – at least, not extensively. They look at what is working and adapt processes to their own environment. They actively pay attention to lessons learned. They work hard to build organisational knowledge and avoid the mistakes of the past – following in the footsteps of those who have done good work.

In other words, don’t reinvent the wheel if you don’t have to. Let someone else do the heavy lifting. In project management this could look like:

  • Using a standard, published, recognised body of knowledge instead of trying to write your own
  • Using best practice processes, instead of trying to design your own
  • Having a robust and followed lessons learned process so that continuous improvement becomes part of the fabric of the way things are done (whether that’s using Agile approaches or continuous review during a sequential-style deliver)
  • Using existing published career paths and competency models for your project managers instead of trying to write your own
  • Using existing, recognised training and credentials for your project managers and team members instead of trying to design in-house training schemes.

There’s no requirement for ‘success’ to start with a lot of hard work in setting up systems that already exist elsewhere. While you should always be mindful of taking intellectual property and reusing it as your own (ethics is always paramount), there are plenty of materials, processes, templates and more out there that mean you can create a successful project management culture with a smaller initial outlay.

The Negative Side of Funding

The other interesting idea that has come through Gladwell’s thinking is the concept of money constraining creativity.

In other words, the more money you have, the less creative your project environment is likely to be, and that can have implications for success – both on a project level and on a portfolio or PMO level.

You’ve probably seen this yourself in your workplace. When money isn’t an issue on a project (if you’ve been lucky enough to be in that kind of environment) then you’ll know that when you hit a problem, the first thing the team thinks about is how to buy their way out of it.

When I researched my first book, Project Management in the Real World, I included a case study of a build project where the team had to work creatively together to find ways to hit the project budget. The project was a success because the effort of having to think creatively around funding brought the team together. The closer working relationships they forged when together the various suppliers worked with the project’s objectives front of mind made it a better project for everyone.

Money Doesn’t Equal Success

I don’t doubt that money makes projects more likely to hit their objectives. The experience of working on a project with adequate funding is more pleasant than having to scrabble for resources, count every penny, and challenge every receipt. But it isn’t the only thing that makes a project successful.

Think about your projects and what success looks like for you. How much of it is determined by the funding available and how much by the talent of the team, the timescales or the commitment of leadership?

What do you think about this topic? I’d love to hear your thoughts so let me know in the comments below.

Posted on: December 13, 2017 07:59 AM | Permalink | Comments (0)

3 Ways To Keep Your Project on Budget

Categories: budget

Here’s a short video sharing three ways to keep your project on budget, but be warned, these are suggestions for project managers willing to take the difficult decisions and have hard conversations!

You can see more tips on how to keep your project on budget in this article.

Posted on: November 20, 2017 07:59 AM | Permalink | Comments (8)

How To Secure Continued Funding For Your Project

Categories: budget

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.

Plan Ahead

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.

Posted on: November 07, 2017 07:59 AM | Permalink | Comments (7)

How To Deliver When Your Project Budget is Cut

Categories: budget

Budget cuts… this is something every project manager faces at some time in their career. Your healthy budget of whatever is suddenly subject to scrutiny because your sponsor’s department has been told to find savings of X% and all projects are at risk.

Then you find that your project has generously ‘handed back’ a sizeable amount to the corporate coffers. And yet somehow you’re still expected to carry on.

The good news is that in situations like this your project sponsor will know what has happened and should be broadly sympathetic to the idea that they can’t have everything they wanted after all. If the money isn’t there, they know you’re going to have some limitations on what you can deliver. But where do you start with that conversation?

Start With the Requirements

A closer working relationship is exactly what you should be aiming for when budgets are stretched. The more you can understand what it is your customer wants – in really granular detail – the better it is for everyone as you’ll (hopefully) be able to come up with solutions that achieve the ‘right’ outcomes in a cost-effective way.

Check that there’s nothing extra that has found its way into the scope. Check that you understand what’s expected from the contract so that you aren’t inflating or gold plating anything unnecessarily. What could you lose from scope (with everyone’s agreement) that would still end up with the customer getting broadly what they wanted?

Look at the processes and bureaucracy involved in getting the work done: often closer working relationships can strip time out of these processes and time is money, so there could be savings there.

Basically, think collaboratively about what’s possible. Lean in.

Stagger the Work

Look at what could possibly be removed from the initial scope of your project and pushed to a further delivery phase. Financial years are cyclical – there might be more money available next year to finish a particular element. Consider what parts of scope you could agree to postpone.

Small Changes Make the Difference

It’s rare that you’ll be able to make one sweeping change to your project and have all your financial issues go away. Rather, you’ll be making lots of smaller changes and tweaks across the board with a view to improving the budget position holistically.

Together, small changes really do add up. Unfortunately, identifying the right small changes and doing the planning work to incorporate lots of changes does take time. You might want to slow down progress on your project while you’re doing all this reforecasting work as you don’t want to incur additional (and perhaps unnecessary cost) at this time.

Work with your project sponsor, key suppliers and other people on the team to look at where savings could be made that would contribute to meeting the financial challenges overall.

Keep Talking

Projects move on and evolve frequently, and if you hit a problem that is going to affect the budget you should bring that to the attention of the project sponsor straight away. You should do that anyway, but in times of financial pressure and when your budget is challenged, it’s even more important to involve them in the planning and response to issues when money is at stake.

Keeping honest communication channels open is also helpful for building trust, and it ensures that you hear about changes that might affect you. For example, there might be more budget that needs to be reallocated, or you might be lucky and find that some extra cash is flowing your way.

How Much is Too Much?

In an article for PMToday Magazine way back in March 2010, John Judge explained the four stages of budget cuts, which I’ve elaborated on here:

  • Budget cut by up to 15%: you can work within reasonable cost reductions across the project and hopefully minimise the impact on the project scope.
  • Budget cut by 15-25%: more noticeable scope impacts with likely impact on the functionality of your end result as well.
  • Budget cut by 25-35%: you’ll have to look seriously at what can be removed from scope or deprioritised, or moved into a future phase or the next financial year.
  • Budget cut by >35%: consider pausing closing down the project as with this level of cuts it’s unlikely that you’ll be able to deliver effectively.

These are useful rules of thumb, but it does beg the question: if we can manage with budget cuts of up to 15%, why don’t we stretch ourselves to deliver under budget by that amount anyway?

Do you think you could cope if you lost 15% of your budget tomorrow? Let us know in the comments section!

Posted on: September 18, 2017 06:00 AM | Permalink | Comments (7)

5 Differences Between Project Accounting & Financial Accounting

Categories: accounting, budget

In this video I share 5 differences between what it means to do accounting on your project (and manage the financials/budget) and how financial accounting can work. Understanding these differences makes it easier for you to work with your Finance teams and run your project budgeting processes.

Posted on: September 13, 2017 08:00 AM | Permalink | Comments (5)
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