As a manager in any organization, you may or may not be in the accounts department. However, managing finances is a task that falls in your gamut of work. The various costs associated with the running of a project have to be deftly balanced so that there is no budget overshoot. It is not always an easy task to forecast costs, especially if the project is of a long duration. In such cases, keeping in mind a few aspects will be beneficial for you to manage project finances. The first step towards optimal cost management is to make you a member of the budgeting team.
Keep a buffer in your budget
Categorize your project budget into different heads and try to allocate costs for the individual heads. For every head, make sure you keep a buffer amount for emergencies. The buffer percentage will vary depending on the criticality of the head. For example, attrition and training are two topmost priorities you should keep in mind. In addition, purchase of new equipment and sudden travel requirements can crop up at any time. The most important part of framing the budget is your assumptions. This will be primary driven by your experience and the current financial scenario. Things like inflation can affect your budget, and that requires a higher buffer.
Take the finance department under your wings
Whatever be the nature of your project, make sure you keep your finance department professionals informed. This will ensure that for any sudden cost impact or tweaking of budget, they will be able to provide consultancy effectively. The benefits are two-fold. One, they will be aware of the organization’s finance scenario. Secondly, the information they will have about your project costs will help them to provide fruitful solutions. The assumptions that you make should be clear to them as well so that they can raise the flag at the right time. Risk mitigation and quality control costs need reviews on a periodic basis, which they can help you with.
Coordinate with your team
The successful execution of your project largely depends on the team you are leading. They should be made aware of the budget that you have framed. In addition, the inputs to the budget by way of your assumptions should also be known to them. While you are the person who is planning, they will be able to set their goals if the financial aspects are clear to them. It is very essential that as the creator of the budget, it is your responsibility to ensure adherence. It is equally important to look at the figures intermittently and devise modified approaches as required.
The continuous monitoring process as referred to above has to be a structured one. You need to ensure that you do a cost-benefit analysis periodically, and modify numbers as required. Some of the most important budgetary aspects consist of the largest part of your budget. Check to see that the expected income from the project is substantially higher than your budget. Staff re-orientation may be needed sometime to ensure budgetary compliance in terms of the salary structure. Since both the aspects are highly interrelated, your finance management procedure should take care of this.