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Speaking to the person who manages finances. How do he create project budgets? What do he want project managers to know?
Speaking to the person who manages finances. How do he create project budgets? What do he want project managers to know?
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I can provide insights into how the person who manages finances typically creates project budgets and what they may want project managers to know. However, it's important to note that specific practices may vary depending on the organization and industry. Here are some general points:
Collaboration with Project Managers: The finance manager typically collaborates closely with project managers during the budget creation process. They rely on project managers to provide accurate and detailed information about project requirements, scope, timelines, and resource needs. Close cooperation and effective communication between finance and project management teams are crucial for creating realistic budgets.
Cost Estimation Techniques: Finance managers use various cost estimation techniques to forecast project expenses. These techniques may include historical data analysis, benchmarking against similar projects, expert judgment, and parametric or bottom-up estimating methods. They may also consider external factors such as inflation, market conditions, and currency fluctuations.
Identification of Direct and Indirect Costs: Finance managers work with project managers to identify both direct and indirect costs associated with the project. Direct costs are expenses specifically tied to the project, such as labor, materials, and equipment. Indirect costs, also known as overheads, include expenses that are not directly attributable to the project but still contribute to its overall cost, such as administrative overhead, utilities, or shared resources.
Budget Constraints and Objectives: Finance managers take into account budget constraints and organizational objectives when creating project budgets. They consider the financial resources available, any funding restrictions, and the organization's strategic priorities. The finance manager aims to create a budget that aligns with these constraints while supporting the successful completion of the project.
Contingency Planning and Risk Assessment: Finance managers understand the importance of contingency planning and risk assessment in budget creation. They work with project managers to identify potential risks and uncertainties that may impact project costs. They may allocate contingency reserves within the budget to address unforeseen events or changes in project scope.
Monitoring and Reporting: Finance managers emphasize the importance of monitoring and reporting project costs throughout the project lifecycle. They want project managers to provide regular updates on actual expenditures, budget utilization, and any cost variances. Timely and accurate financial reporting enables the finance manager to assess the project's financial health and make informed decisions.
Communication and Transparency: Finance managers value open communication and transparency between project managers and the finance team. They want project managers to keep them informed about any changes in project scope, resource needs, or other factors that may impact project costs. This allows the finance manager to adjust the budget and provide necessary support or guidance.
Compliance and Financial Regulations: Finance managers emphasize the importance of adhering to financial regulations, policies, and procedures. They want project managers to understand and comply with financial controls, procurement guidelines, and accounting practices. This ensures that project expenditures are recorded accurately and in accordance with applicable regulations.
Collaboration for Budget Revisions: During the project lifecycle, budget revisions may be necessary due to scope changes, unforeseen events, or new information. Finance managers expect project managers to collaborate with them in assessing the impact of such changes on project costs. They want project managers to communicate any budget revision needs promptly and provide supporting information to facilitate the decision-making process.
By understanding these aspects of budget creation and aligning their practices with the finance manager's expectations, project managers can foster effective collaboration, financial accountability, and successful budget management throughout the project.
