How to Manage Your Project Finances – Best Practices

It doesn’t matter how great an idea is or how badly a business needs a certain innovation, at the end of the day, all projects are subject to the limitations of their financial backing. Finance, along with the organization’s mission and the current need at hand, is a key component to the planning and execution of any project. So what is project finance management? What are the best practices for it? How can you take your organization to the next level of financial management? Let’s dive into these questions.

What is project financial management?

In short, project financial management is putting into place standards and practices that will keep your organization’s projects within budget, reduce waste, and streamline processes. Sound financial management is a process that takes place through the entire life cycle of a project and is a part of each decision that is made.

Good financial management of a project begins long before a project is even conceived. Organizations develop standards and practices for budgeting, procurement, reporting, and planning that hopefully become a part of the adopted culture. Once this has become part of the culture within the organization, sound financial planning is a basic element of project planning.

The first steps in the financial management of a specific project begin early in project planning. During the initiation and planning processes, the scope of the project is determined and an initial budget is developed. This early stage is critical because once a project is underway, obtaining more funding in the middle of a project is very, very difficult. Budgeting during the early stages of a project also sets into the procurement of resources. If accurate and sound financials are not mapped out, the team could end overspending on resources that weren’t needed or could end up not budgeting for enough of what is needed. Either case is wasteful and unproductive.

Who is the project finance manager?

Organizations and project teams should have a dedicated position that oversees the practices around solid financial management. This role is often designated as the project finance manager. This manager has a variety of tasks and responsibilities but is basically responsible for the oversight of a project’s financial health and making sure that the organization’s standard practices for financial responsibility are adhered to.

Some of the responsibilities of a project finance manager include:

Budget oversight and management
Efficiency analysis
Communication to stakeholders
Financial analysis
Planning and forecasting
Leadership

Best practices for project finance management

Putting best practices into place and reinforcing them at every level of the organization is the best way to make them a part of your project team’s culture. Ultimately, each organization is different and its standards and best practices will likely flex to fit their specific needs. Here are some best practices for project finance management that can be applied to any organization, regardless of industry or size:

Make sound financial management part of the culture: Making sound financial practices a part of organizational culture should be a top priority for leadership. These practices should be modeled by those at the top. As a part of the culture within an organization, team members can take pride in being mindful of financial planning as it becomes a part of a daily routine.
Get a plan together: Having a well-thought-out plan helps to control expenses and stay within budget. With a plan in place, a project team has a blueprint for how to move forward and it takes one more item off their plate. Just stick to the plan!
Develop a set of go-to metrics: We are in a time where we’ve been blessed with the ability to generate reports on just about anything at the drop of a hat. Robust financial management software enables us to output mountains of data with any set of criteria we want. While this is a huge asset, it can also be very intimidating and overwhelming. It is best to find a handful of metrics, maybe two or three, that seems to provide the best insight for an organization’s specific situation and stick with those. Keeping track of fewer, more impactful metrics allows for more time to get down in the nitty-gritty of the work and not be bogged down with mountains of data.
Establish a schedule for reviewing metrics: Once a set of metrics has been agreed upon, they will need to be reviewed on a regular basis. The intervals can be determined by the length and scope of the project but the idea is to check in on these metrics with enough frequency to head off any surprises and maintain control over the agreed-upon budget.
Communication is always the key: Now that the metrics are agreed upon and there is a schedule for reviewing them, the next step is to make sure that that information is in the hands of the project’s stakeholders. Not every level of stakeholder will need or even want this information delivered to them on a regular basis. This could create a situation where there is detrimental micro-management by individuals who do not need to be involved in the day to day operations. This information should be at least available though. On the ground management and the project’s financial manager should certainly both be looking at this information and touching base to make sure expectations are aligned.
One set of rules for everyone: The standards and processes for budgeting, finances, and reporting should be the same across the organization. A level of leadership and management should follow the same practices and be bound by the same rules. Not only does this streamline the reporting and make project finance management simpler, but it is also an ethical approach to financial management. If an organization seeks to instill sound financial practices as a part of its culture, the organization’s leadership should model the practices they hope to filter down into the management structure.
Reporting, reporting, reporting: One of the most helpful tools in financial management is the ability to look to the past and draw on experiences and trends. This is all accomplished through a robust reporting structure. Being able to obtain custom reports for the information that is most important to your team enables you to look back to not only improve your financial management performance but also better plan in the future.

What is financial management software?

There are many tools available for project finance managers to use in their day-to-day activities. Fortunately, there is an abundance of financial management software that is aimed strictly at planning, tracking, and analyzing an organization’s finances.

How can Project Management Software help in Finance Management?

Financial management requires a tremendous amount of data input and output. Any help in automating these processes only serves to make these tasks all the more streamlined. It can be helpful to think of financial management as a project, just like any other. The same principles of planning, execution, and tracking application to the financial side of projects.

Project Management Software is a great tool to help manage the countless moving parts associated with adhering to your organization’s standard financial practices. Project management software can help with project planning, task tracking, resource allocation, milestone tracking, and forecast cost and revenue tracking.

Here are just a handful of the ways that a full-service project management software can help financial management:

Organize: Perhaps the greatest asset of project management software is the high degree of organization that is provided. Timelines, assignments, and resources are all input and filtered with just a few clicks. Best of all, changes to plans and timelines almost always create ripple effects, the results of which can be automated. Being organized with finances is critical as working backward and figuring out funding structures in reverse is quite burdensome.
Collaborate: In an ideal setting, all management parties responsible for finances would have access to the information they need to not only manage their own aspect of the business, but it would facilitate future discussion with the project finance manager. The finance manager’s role is made much easier when other members of the management team have access to as much information as possible. Project management software puts this information in the hands of anyone who needs it and fosters collaboration. Best of all, if the software is web-based this information can be accessed anywhere, anytime, by any member of the team.
Milestones: Tracking and celebrating milestones is a pillar of great management. It is no different when it comes to financial project management. Milestones serve as indicators that a project is on the right track and keeping pace with them and communicating it to the project team fosters a sense of accomplishment. Financial milestones can be tracked with project management software with automatic reminders set to take the worry of remembering of the financial manager’s plate.
Real-time updates: While milestones are important check-in points, oftentimes there is a need for more in-the-moment information. It could be that the financial picture of the organization has changed and the health of the project needs to be assessed. Another scenario is that during implementation, it was determined that additional resources are needed. In either of these situations, real-time updates are needed to provide an accurate picture of the current financial situation. Project management software can show stakeholders exactly what
Resource allocation: Financial management extends beyond just money managing. A project team’s resources and staff are assets that are highly valued. How these resources are expended is often more important than the cash that an organization spends. Project management software excels in resource allocation. It allows for the tracking of staff, time, equipment, etc… and can identify where there are overlap and opportunity for efficiency.
Task management: The actual management and tracking of specific tasks are likely what first comes to mind for most people when they hear the term “project management software.” In fact, project management software excels at this as well. This aspect of the software can help a financial project manager in two ways. First, it can help them understand the status and health of a project by providing a snapshot of how day-to-day activities are progressing. Secondly, financial projects in and of themselves can utilize the software to track their specific tasks. An overhaul of the team’s budgeting timeline or the implementation of a new procurement process is task-intensive. This can be easily facilitated by project management software.

Top three software for financial management

The software market is flooded with options for financial management tools. The most ubiquitous are QuickBooks and Quicken. These tools are longstanding brands that have a proven reputation among financial managers. They have been developed and honed over the years to meet the exacting needs of the financial sector. With regards to straight-ahead finance and accounting tools, these are the industry standard. Depending on the organization’s needs, Microsoft Excel is also a very adaptable option that is both cost-effective and flexible. There are countless templates and tutorials online for creating finance-based spreadsheets. Excel is a great tool that is bare bones and provides complete flexibility for individualized needs.

An option to consider is to pair one of these existing tools with project management software. As discussed above, a full-service project management software can streamline processes and help manage the more tactical aspects of financial management. PlanStreet’s case management software is easy to adapt to an organization’s specialized field and supplements the actual tracking aspects of existing finance and accounting software. When coupled, these tools can help take your organization to the next level of efficiency.

Project financial management: a necessity

Today’s project-driven work environment requires financial vigilance. Financial project managers play an important role in the day-to-day operation of the project and serve as a resource to the entire stakeholder team. Fortunately, there is a wealth of tools available for them that make the job not just simpler, but more effective. After all, financial management isn’t going away anytime soon.

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