Sue Gull , Corporate Partner at Scrutton Bland has provided financial project management advice to a wide range of clients, and gives a few key points to bear in mind when planning the finance for your project. 1 Allocate a cost... for everything! 6 Keep your lines of communication open Communication is essential to every phase of a project. Positive and negative news are equally important, so you need to
Each and every job and process needs to be costed and a budget plan drawn up. Use historic expenditure patterns and check for appropriate benchmarks that may have been identified for budgeting purposes. But look forward: use your commercial knowledge to identify future changes which might impact on costs, such as legislative changes or exchange rates. 2 Allow for change There will always be variances in costs, so don’t be tempted to draw up a budget fixed on the lowest figures. For example, labour costs need to take holidays and sickness pay into account, and overhead costs soon mount up. Bear in mind that a job may at first seem to have a healthy profit margin, but that may quickly erode once all the overhead costs have been incurred. 3 Set up control mechanisms define who will control your project finances, how frequently they will report, and to whom. Ensure that your finance manager has access to the appropriate systems to allow them to collect timely and relevant information, and minimise the need for duplication of input. Check exactly who needs to receive the data, and beware of sending everything out in an ‘information dump’ which can cause confusion. 4 Don’t overstretch your cash When preparing and implementing a project, look at the working capital you have and ensure you have enough to keep the project moving. Be honest about what expenditure will turn into cash promptly, and which costs will take longer to recoup. Identify the percentage of cash which will be tied up in retentions. 5 Review progress and capture costs Set up a regular review system to capture costs and separate recoverable costs from non-recoverable costs. Make sure you know how the costs are made up and question what they include. For example, do the labour rates include a percentage for overheads and profit?
establish a flow of communication with everyone involved. This transparency will make the process smoother and reduce stress whenever a problem arises. 7 Check your work in progress As costs build up in work in progress make sure they are subject to regular review and can be supported. Identify work in progress which is represented by irrecoverable costs and make sure it is accounted for correctly and understood by all those involved in the project. 8 Ask questions Every good financial project manager becomes an integral part of the project, working alongside others on the project and sense checking their figures. Financial project management on construction jobs requires particular care, because field elements can drastically affect the workflow of projects. It’s a good idea to develop a system of people who review others’ work in progress and who can challenge the data when required. For example, how are costs shared between projects dealt with? 9 Use tools to monitor costs and budgets Good financial project management requires all direct and indirect costs to be recorded. Even relatively small construction projects contain hundreds of individual costs, so to remain effective you need to use software that can track and monitor all costs, and alleviate the need to coordinate with every member of the team in order to allocate them against budgets. 10 Be honest about the profitability of the project Most of us are optimists, so make sure you build in contingencies for extra costs and time. Work in progress can distort figures especially on large projects covering a number of months. If you haven’t dealt with it before, your accountant will be able to advise you on how to factor it in. If you are embarking on a property or construction project or need help with financial project management on a business venture, please get in touch with one of our professional advisers. Contact Sue Gull on 01473 267000 or email sue.gull@scruttonbland.co.uk or go to our website www.scruttonbland.co.uk
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