Can You Answer These Project Finance Questions?

If there’s one topic project management consultants know their clients hear about often, it’s money. The most common inquiries revolve around how much money each initiative has consumed, but team members also want to confirm how much remains available to move current efforts to completion and sponsors sometimes put out feelers to see if there will be anything left over to capture for their next project.

Today’s dynamic business environment requires advanced insight into project finances. To keep pace with rapidly changing market pressures and business goals, your team needs financial data available for review not only at the project level but also across the entire portfolio.

project finance

 

As you look for opportunities to improve your budget forecasting and tracking capabilities, ask yourself if you can answer these common project finance questions. If you can’t, it may be time to evaluate a methodology that delivers better budget insight and supports more advanced financial performance analysis.

Which projects are over budget?

It’s a simple ask when your organization has only a handful of efforts in the works. As the volume of projects grows, it becomes more complex to track budget variances. You need a proven portfolio management strategy to ensure you’re gathering the right data for every project, that you have a process to compile and standardize budget information coming in from multiple project teams, that you’re accessing the most current data at the portfolio level for analysis, and that you can call up financial metrics on demand. By maintaining visibility across every budget in your portfolio, you’ll be able to quickly identify any that are at risk of going over their allotted spend.

Which projects are under budget?

It’s less common to be queried about a favorable budget status, but there are times when identifying which projects are tracking in positive territory would be useful. The need to immediately launch a critical initiative, for example—such as one required to comply with emerging regulatory requirements—could drive a request to find available funds to get the project started. Difficult financial circumstances may also lead executives to seek out extra project money so they can redirect it to at-risk functions. While not the most frequent inquiry, it’s still important to know how every project in your portfolio is performing from a financial perspective.

Which projects are financially dependent on others?

As the number and scope of projects in your portfolio expands, your leadership team may not understand all the connections between the various initiatives. This lack of awareness becomes an issue when changes to a project are proposed that could put funding for other efforts in jeopardy. You must be able to quickly identify these connections and determine how the financial picture would change for all related projects. Does funding for an effort further down the pipeline depend on an active project? This is most often the case when a current project is expected to deliver cost savings that will free up additional monies going forward, or when expanded manufacturing capabilities or a new product launch will bring in additional revenue. These dependencies should be weighed whenever project changes are under consideration.

What are the potential financial impacts of delayed projects?

Any time the prospect of postponements, pauses, or other delays come up, those discussions will likely include questions about ripples on the financial side that could result from shifting the timetable. Project teams should not only have data readily available that outlines how a delay might impact the budget forecast for the project that’s being shelved, but also for any other projects that are forecasted to share staff or other resources.

 

PMAlliance, Inc offers project management consultingproject management training and projecportfolio management services.

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