1. Financial management starts with the
clearly defined goals of the project.
2. These goals are used to develop a plan of action to achieve them – a plan that is realistic, able to be assessed and is the most efficient way of achieving the goals.
3. These plans are translated into a budget that assigns resources to each activity – the budget preparation will provide additional information about each activity which may cause the plan to be amended.
4. When this part of the cycle is completed, there will be a concise budget that allocates resources to each activity.
5. The aim is to create a budget that will be as close as possible to the actual project operation.
6. When the project commences, accounting is also commenced. Accounting records and reports on all financial transactions.
7. There are two types of accounting – the formal organizational accounting performed by the accounting section of the organization and the management accounting performed by the project manager.
8. Periodically, throughout the project, the manager transfers information from the accounting reports into the budget.
9. During this phase the manager continually compares the projections of the budget with the actual results of the accounting. This activity may lead to management intervention in the project to address areas of concern.
10. Finally, at the end of the project, the manager along with the accounting personnel will produce a series of reports of the financial outcomes of the project.
11. These reports will be incorporated into the overall report of the project and provide valuable information to aid in the development of future projects.