Wednesday, March 28, 2018

6-Financial Plan

What : A Financial Plan identifies the Project Finance (i.e. money) needed to meet specific objectives. The Financial Plan defines all of the various types of expenses that a project will incur (labor, equipment, materials and administration costs) along with an estimation of the value of each expense. The Financial Plan also summarizes the total expense to be incurred across the project and this total expense becomes the project budget. As part of the Financial Planning exercise, a schedule is provided which states the amount of money needed during each stage of the project.

A Financial Plan enables you to set a "budget", against which you measure your expenditure. To deliver you project "within budget", you need to produce the project deliverables at a total cost which does not exceed that stated in the budget.

When : Whenever you need to ask for money, you need a sound Financial Plan showing how it will be consumed. For a Project Manager, getting Project Finance is one of the most critical tasks in the project. Therefore, sound Financial Planning principles must be followed to ensure a positive outcome. A detailed Financial Plan for your project will help you get the Project Finance needed to successfully deliver your project on time.

In Financial Plan you must identify the:

  • Types of labor costs to be incurred during the project
  • Items of equipment needed to deliver the project
  • Various materials needed by the project
  • Unit costs for labor, equipment and materials
  • Other costs types such as administration
  • Amount of contingency needed

You can then use the Financial Plan to create a budget by:
  • Calculating the total cost involved in completing the project
  • Identifying the total cost of each project activity
  • Creating a schedule of expenses