This video outlines the most frequent budget management hurdles, how these can be accommodated with wise planning, and timing the execution of procurement activities.
- If you were to go shopping, find the right piece of clothing, then go to the register to find out you didn't have the correct credit or debit card to pay for the purchase, you'd be frustrated. To ensure the equivalent of this doesn't happen with your project budget, you need to understand how the budget processes work within your company. The key is to ensure your diligent budget work doesn't get undermined by undue delays and administrative obstacles. The Project Management Institute calls this funding limit reconciliation.
So, here are a few areas you will need to understand to properly perform funding limit reconciliation. First, confirm how your organization performs contract management. To get contracts for work signed off, do you have to go through the legal department and then finance? Who signs off on the terms and conditions of a contract? For example, say you need three technical assistants for your project. Knowing who you would work with to look at your options for bringing them on board, and determining which option is best, could take a while, and should be part of your planning.
Secondly, find out how your organization pays its vendors. What sort of paperwork does finance need before they'll release payment? What are the payment terms? What sort of information do you need to supply so your vendors can be set up in your company's payment system? In order to ensure these three technical assistants are added to your project in a timely manner, you may have to reach out in advance and get their tax and company registration details. Third, consider what processes will be expected of you when managing your project's cash flow.
Does your company care if you spend the money this fiscal quarter versus next quarter? Do payments have to be finalized by the end of the financial year? Can you purchase products and services in advance? Let's say you only needed one of the technical assistants for the first two months, and then two additional for the last two months. Are you authorized to negotiate a deal for all three technical assistants, so you get a better price, and pay for it in advance? Lastly, another hurdle that can trip up project managers is the finance department's need to have receipts or purchase orders to process invoices.
Most, if not all finance departments require evidence of agreed pricing, and confirmation of spending. Make sure you know exactly what's needed and when. It might sound like I'm suggesting you ask a lot of questions, and that's exactly what I'm doing. Having detailed information about how you need to proceed with your financial transactions can save you a lot of pain, heartache, and relationship issues with your vendors. Of course, there'll still be things that won't go exactly to plan on your project.
But by verifying your payment processes, at least there'll be fewer surprises.
Note: This course follows the latest guidance from Project Management Institute, Inc., as outlined the PMBOK® 6 Guide.
- Recall best practices for project budgeting and estimation.
- Distinguish common estimation approaches used to build project budgets, and understand when to use them.
- Identify best practices for budget expectation management, while utilizing sound budget refinement techniques.
- Describe and explore agile project budgeting techniques.
- Review various approaches for correcting project budget overruns.
- Review sound budget reporting approaches, including how they can be used to report project status.
- Recognize the issues and changes that can put a project budget in jeopardy.