Even though the financing area of the project is perceived as the responsibility within stakeholder area of influence and is not directly related to project manager, without project management techniques and strategies on calculating the cost of the project, not knowing exactly the amount of money required and the cost baseline can negatively influence the project.
Project finance is a frequently addressed topic in the field of project management due to its prominent importance. Financing the project, by definition, is “the most important action of a sponsor, after having championed the development of the project charter”. Without proper financial support, projects will struggle to thrive and get the proper resources. Because there are so many things under the influence of finance management of the project, this must be taken as a key component for program project managers.
In addition to time and objectives, cost is one of the three existing constraints in any project. Cash flow analysis is considered as “examining the schedule for the program’s revenues and expenses” which is fundamental for portfolio balancing. Moreover, quantitative analysis is a tool to examine resource loading requirements or cash flow. Scenario and probability analysis and graphical analysis methods are considered as tools and techniques to understand better the balancing of the projects. And cost baseline is known as an important source of information for control purposes.
Financial Management is defined as “the processes to acquire and manage the financial resources for the project”. While Cost Management is stated to underlie the day-to-day cost management of the project, financial management is more related to the analyses of the net cash flow involving Financial Planning, Financial Control, and Administration and Records. Briefly stated, Financial Planning is “the phase in which all the requirements of a financial nature are identified and provided for”; Financial Control is to make sure that all items are within budget and the financial cash forecast and Financial Administration and Records assures all financial information is administrated and that records are well-made
FINANCING THE PROJECT
This is to ensure that the required amount of money is ready by the time it is needed. The responsibility of sponsors is to calculate the amount of the cost, benefits and investment, then adapt the time scale to know how much and when the money is needed and make sure that the money is available. This requires a project manager to understand product benefits and operating costs as well as to transform them into expected money.
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- Pinto, J. Â. C. (2009). Financing the project. Paper presented at PMI® Global Congress 2009—EMEA, Amsterdam, North Holland, The Netherlands. Newtown Square, PA: Project Management Institute.
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