If there is one thing everyone has learned in the construction hospitality field during the COVID-19 pandemic is the importance of financial project management.
Here are 6 ways to Keep a project on the right financial track
- Keep it easy.
Stakeholders are not always experts at interpreting financial data. In addition to all the detailed support having easy to read metrics are important for everyone to understand the complete picture at a moment’s notice. Budget to Forecast and Forecast to Actuals are easy to read metrics. Vendor contract value to actuals will also provide useful insight.
- Keep it organized.
When starting a project, clearly define to the agreement of all stakeholders how the project is going to be tracked early on. If a project is being tracked into three cost areas- Guestrooms, Public Space and Exterior and then halfway through the renovation a stakeholder wants the Public Space broken up into two phases this can create undo stress and difficulty. Always define the methodology early on and have vendors arrange their billing to match how the project is financially organized.
- Keep it simple.
When defining cost codes or cost areas the tendency is to either have too little or too much. Too many cost codes to track can lead to errors and interpretation when receiving invoices. Too little cost codes does not give stakeholders the data they need to make decisions and truly understand the project. Just like Goldilocks and the Three Bears, finding the balance is key to understanding where a project is at with the most accurate information.
- Keep the money flowing.
Understanding lead times and the project schedule is extremely important for financial project management. By identifying when the funds will need to be available, a financial project manager is able to communicate the cash forecast to stakeholders and not create undo delays.
- Keep focus on the details.
When receiving invoices make sure you are categorizing them correctly the first time. I cannot think of any bigger time killer than having to go back through 100’s of invoices to figure out why a cost code is over budget due to a coding error. The project management field has fantastic technical tools, but coding errors can create real headaches towards the end of the project.
- Keep it forecasted.
Do not be scared to reforecast a project monthly. Many problems can be avoided by working through a project forecast more often. Accurate forecasting is a lot of work but projects change daily. By going through the detailed forecast process, you can make sure that the funds are available when needed and that any time/cost overruns are identified early.
With all the suggestions above, successful project management comes down to taking the time early in the project life cycle to define the goals and process. This early work will pay dividends keeping a project on time and under budget.
By: Nick Muller