The Project Manager and Their
Interaction with the Finance Organization
By Mike Cooper
has several key roles for an organization, and when it comes to IT
projects, the following are uppermost in their mind:
with business purpose and corporate objectives
prioritization of work
of costs – actual and forecast
CFO’s will be focused on
wanting to know that IT is providing value for money – are the
investments the organization is making in IT projects the right
investments, and are we getting value for our investment?
Various people in the finance department will be more focused on the
mechanics of maintaining the corporate finances – what has the
project cost, what is it expected to cost, what are the different cost
elements; some items may be capitalized and need to fit in the capital
budget, others may be expensed, etc.
We can divide the needs of the finance department into these
two categories – investment decisions, and corporate finances. We
will use this to help structure the rest of this article, along with
another category – what do we, as project managers, need from the
OK, so what does this all
mean to us as project managers?
With regard to business
value, it means firstly that our project must have a clear purpose.
Not all IT projects can be directly tied to a business ROI
calculation, for instance we may be doing a project to meet regulatory
needs, or to improve our underlying IT infrastructure.
However, there must always be a clear purpose for the project. If you were not involved in defining this, make sure it has
been done. Steer clear of
projects that don’t meet a real need!
As you manage the project,
keep ensuring that it is focused on the business purpose.
Doug Webb, Group Financial Controller for QinetiQ Group plc,
Europe’s largest science and technology organization,
told me recently that when implementing a major financial
systems project, “One of the keys was that we used neither a finance
nor an IT person for the project management - we appointed a
"professional" project manager to oversee the whole project,
with finance and IT people working on the team. The reason for this is
that I did not believe that either our finance or IT people were very
good at project management - they generally got lost in the weeds of
their technical specialism - we needed someone who could focus on the
process of project management to ensure success. In particular they
can ensure that technical scope creep is avoided.”
Clearly here is a finance executive focused on the business
purpose of the project, and a warning to IT project managers who do
not focus on key business drivers.
for what happens when your project is completed, beware of the use of
the word “completed”. Far
too many IT project managers raise their hands and claim success when
a new system has passed user acceptance tests and is put into
here's the problem - they think they have already
"succeeded" because they have delivered the system, and
maintenance is typically regarded as a boring bug-fix phase with some
minor enhancements. I suggest that instead of this mentality, they
think not of this work as maintenance, but as value enhancement. It is
really addressing the question "how can we get the most out of
our investment?". I suggest that with this mentality, you can at
the very least go back to your customer after 3 months, 6 months, 1
year, and ask "how's it going?". Meaning, what value are you
getting from the system and what could / should be done to enhance
that value? If a vendor
or an internal IT shop shifts their mental mode in this way it can
have a big payback in terms of how you are valued as a supplier to the
business. This is because instead just of being interested in doing
the work (building the system) you are showing real interest in the
results of the work. And it is the results that were the reason for
doing the project in the first place.
This is what the CFO is focused on – is IT providing real
value through its projects? An IT shop that cannot answer the question about what value
it has provided over the past year, is going to have a tough time
justifying its budget for the upcoming year.
As a PM you can play a part in this by promoting it and
including activities and funding for it during the planning of your
You may think that the
above discussion, although really important, is not about finance.
But I maintain that any good finance department has these
business drivers and IT value uppermost in their mind.
Of course the finance
department has responsibilities for maintaining the corporate
accounts. Here, they have
an expectation that as a project manager, I make good plans for
budgets, make early requests for project expenses so that items like
capital equipment can be integrated with the capital purchase plan of
the organization, and that I constantly update my project forecast.
I will be expected to follow standard corporate practice for
working with suppliers and customers, raising purchase orders,
invoices, tracking down payments, etc, in a timely manner and in
accordance with the organization’s governance structure.
It’s going to be my job to work with finance to explain where
the financial risks are in the forecast, and to collectively agree on
Let’s now look at the
situation from a project manager’s perspective.
Although the PM might be involved in the strategic definition
of projects, it is more likely that the PM is brought in once a
decision has been made to either start a project, or to provide
preliminary information about starting up a project.
When planning, executing and closing a project, as a PM I want
the finance department to support my project in a number of practical
ways. The main thing I
want to see is an attitude in the finance department that we are
supporting each other - the project is (presumably) delivering on some
key business purpose, and I don’t want a finance department that
just demands data from me without providing the financial tools and
support I need to help manage the project to a successful conclusion.
Firstly I want my costs
accurately tracked, and forecast total project costs that the finance
department produces for the organization must come from my forecast
(revised over time) of the project cost to complete.
In other words, I want my view of the project finances to be
the same as the finance department’s view.
I have worked on many projects where either the financial
systems are not setup to track costs at a project level (typically
they would track costs at the functional department level) or the
financial system is not integrated with the tracking tool(s) that the
project manager uses.
In the first case, as a
PM, if finance is not setup to track costs at the project level, you
are on your own! Make
sure that you track your project finances yourself, to enable your
organization to understand how much has been spent, how this compares
to what you expected to spend, and how much is needed to complete the
project. If you don’t
track actual money (or can’t since you don’t know the cost of your
staff) then at least track the effort spent.
PM’s want to be judged on their abilities to manage
predictable projects, which in part means tracking actual costs
against planned costs.
In the second case, where
finance tracks project costs but their system is not integrated with
you (perhaps by direct use by you of the finance system, or by
automatic linking of your tracking tool with the finance system), then
there is a need to reconcile your view of the project finances with
the finance department’s view.
I warn PM’s all the time that the finance department view is
the corporate view. Corporate
accounts are managed by finance, not you!
So if you believe the finance view to be “wrong”, think of
it as being “different from your view” – and make sure that you
work with the finance department to reconcile your view with theirs.
On many projects I have had to do this reconciliation on a
monthly basis, and it was a real pain to have to do this.
Integration of the corporate finance system with the project
financial tracking tool makes life much easier for the PM.
Another major expectation
I have of the finance department is in the area of payments.
To make life easier with the supplier(s) to my project I want
an easy mechanism to raise purchase orders, and payment of supplier
invoices in a timely manger - so that my suppliers don’t get
displeased with me and start to cause problems!
Also, if there is outside funding for my project I want that
money as quick as I can get it! That
means issuing invoices to my customer(s) in a timely manner and
Finally, I want an easy
interface for internal funding requests – I want it to be clearly
defined what the process is, in particular with change requests, and
for the infrastructure (both technology and governance) to support
Throughout the project, I
want easy access to appropriate reports from the finance department
about my project in a timely manner.
To sum up – I recognize
that the finance department is focused on value for money and
predictability, and I need to do what I can to support this.
For my part, I want the finance department to support my
project and provide process and tools that are efficient and effective
for both of us. And this
is an important point for the whole organization.
Successful execution of projects are critical to the success of
organizations and ALL functions should help make their interaction as
effective and efficient as possible for the project manager, so that
the organization can reap the benefits of the project as quickly and
as cost effectively as possible.
If you have any comments,
or war stories related to interactions between project management and
finance, I’d love to hear them.
me an email.
Michael Cooper, 2004