Introduction to Project Financials

Modified on Mon, 22 Apr 2024 at 11:58 AM


This article is targeting managing cost information with the delivery of a project. It is aimed at Project Managers and Project Administrators who may be new to financial accounting, and so seeks to explain the purpose and place of strong financial information within the project delivery lifetime. 

For more experienced Project/Program Managers there are further finanical aspects to consider, and a wider more detailed view is given here.

Project Financials Overview

Having clear and reliable financial visibility is both an essential element of project mangement, and of organisational governance. Fluid is equipped to help both the project manager stay on track, and give visibility of that to the wider organisation, through financial reporting.

This article gives an overview of the need for Project Accounting, the "why", and how Fluid adresses those needs.

More detailed articles are also linked here, to give more in depth knowledge of how this is adressed using Fluid.

In day to day terms, we all manage budgets, even if just in our home environment, and we do that most effectively when we can understand how we prioritise one costs against another. To give an example of this, we may start the year with a plan to take a luxury holiday in September, however if we find that in March we need a significant unplanned repair on the house, we take the priority decision to downgrade the holiday, to enable getting the repair done. 

Companies have to make these calls all the time, and so having clear visibility of the plans, and the actual costs, combined with the project priority, allows companies to make those calls in a way that maximises the companies objectives.

In this article we will discuss the following attributes, and direct you to more detailed 'how to' articles in the Fluid Knowledge Base.

Project Funding

Fluid uses the Project Funding attribute to enable the Budget holder to assign, and control, project budget.

This is a key financial control and so access is restricted via the Financial Administration rights (see How to Use Project Funding).

Initial funding, and future changes are managed through uploads via the nominated Financial Administrator.

Good use and control of this field enables confidence in the way projects are being run – the budgets should be able to tie back to approval and financial planning reporting, and indicate that the portfolio is healthy and on track to make the best use of resources, to achieve company objectives.

It will also empower informed decision making where changing resource constraints are a factor.

Note - The Project funding functionality allows project level funding, however it also allows funding to be further defined, in terms of the year it relates to, and also to the expense type it relates to. This detailed definition of funding gives further control leverage to the organisation. 

Resource / Non Resource Costs

Fluid manages the Resource costs by applying a rate to the hours in both actual and forecast work. More details on how to manage resources can be found in Resource Costs - Managing Forecast and Actuals Data.

The Non Resource costs are entered as cost values, and this can be done at a total figure by month, or by invoice level, whichever the company deem the most appropriate level. For more detail, please see Non-Resource Costs - Managing Forecast and Actuals Data

Forecast & Actuals

To have a real sense of how a project is progressing, it is essential to have a current view of the cost to date, and the future expected costs. This timely view helps identify projects that are running as expected, or, give an early view of a project that may be running over budget, and so need approval to increase the overall funding. It will also enable the organisation to see a project which is not progressing as intended.

Coupling this information with the priority of the project should give the organisation's leadership early warning to help support any necessary corrective decisions.

Financial Lockdowns

Fluid recognises the different control elements needed to secure strong financial reporting , and so has three opportunities to secure periods, enabling different processes and timeframes for Timesheets, Financial Month End and Capitalization. This is done via the Financial Adminstration role, and is found in the Financial Lockdown section, (see table below).

We will look the different benefits to each below.

Financial Month End Close

Fluid functionality recognises that in most organisatons there is a period at the close of a month where certain activities need to happen before the month is locked, or closed, down for financial purposes. This enables timesheets to be caught up to date using the usual processes, and may also allow for a short delay to allow invoices to be received and proccessed in the month they were raised. The conditions, processes, and timeframes to month end processing, will ordinairily be set by the finance team within an organisation, and for that reason, the access to support this in Fluid is within the remit of the Financial Administrator.

Finance Administrators would have the ability to make adjustments to a closed period, but again this should be done in conjunction with organisational constraints and so access is restricted to ensure this due process is followed.

Capitalisation Close

Fluid has additional cabability to recognise a secondary level of closure is often required to enable Capilisation transactions to be processed seperately. For example, many organisations will report capitalisation quarterly, and so this secondary lock enables changes to be made to capex after the standard month end closure happens. This function is within the financial administrators domain, to ensure its use is controlled and in line with the agreed procedudres of the organisation.

Timesheet Close

This allows for the fact the weeks do not always neatly align with month ends, and so allows the control of how timesheets are recorded to be owned by the Finance Teams. This functionality locks the general time recording processes across the organisation. If necessary, there is the ability for time sheets to be amended after close by the financial admin role.

Another critical aspect to the timesheet closure is this can be used to lock rates , and therefore enables rate changes to be applied to a resource throughout the finannical year, via the rate card. 

Note -  If the lock is not applied, the costs will change in line with and rate card movements.

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