We recently ran a PMO Community Event (March 2021 so online, of course) on the topic of managing project financials. We run our PMO community events exclusively for our PMO Practitioners only and they have become extremely popular as they are interactive sessions and are great to meet new PMO practitioners; its an opportunity for you to discuss the PMO industry with your fellow peers.

Topics covered in the PMO community event included:

  • Project financials have always been a headache for many organisations but what impact did Covid have, if any?
  • Are businesses holding the purse strings much more?
  • Did you have to revisit your portfolio of projects?
  • How are you managing financials and what advice would you give to someone new to the topic?
What are the PMO processes that you most struggle to embed?

We first started by asking the community about the PMO processes that leaders and teams struggle the most to embed. As you can see, the main responses were around benefits management and lessons learned. Wellingtone’s 2020 State of Project Management Report shows that only 40% of organisations mostly or always deliver the full benefits of their projects.

We then moved onto the topic of project financials, an area that surprisingly is quite difficult to research. Did you know that one in six projects has a cost overrun of 20% on average and a schedule overrun of 70%? The average cost overrun of all projects is 27%, Harvard Business Review. The failure rate of projects with budgets over $1M is 50% higher than the failure rate of projects with budgets below $350,000, Gartner. These statistics are quite shocking and truly emphasize the importance that must be placed on finance management within the world of project management.

How often do projects deliver their full benefits

Who handles the project financials?It’s interesting to see most respondents confirmed that project financials are mainly managed by the Finance department; does this suggest that there is an issue with internal cross-team communication rather than financial management itself? (see here for an article on effective communication in project management). Essentially, responsibility for managing project financials must be based on an organisation’s way of working. However, we concluded that the approach to managing projects financials should be collaborative; the Project Manager, Finance team and the PMO should all have oversight of project finances. Perhaps a RACI on project financials would be useful, which should be created and maintained by the Project Manager. We’d also suggest a pre-project Board meeting or preparatory work solely focussed on collating and analysing project financials. If you’re working in an Agile environment, this information could be displayed on your virtual project radiator.

How are you reporting on project financials?

The next topic discussed was the reporting of project financials. Generally, attendees have some form of monthly dashboard reporting on finances and use of some tool to enhance reporting. We agreed that reporting on project financials is a must and should form part of a monthly reporting pack. This information should be available to all project stakeholders, especially those at a senior level. We reviewed Wellingtone’s Portfolio Cost report from Power BI; feedback was positive and the benefits of having such a report are obvious. However, it is the collation and updating of this data that is the trickiest part! Again, this requires some serious collaboration between teams and a fundamental understanding from all stakeholders on the importance of data accuracy, currency and transparency.

Portfolio Cost Report from Microsoft Power BI

We also discussed the impact of Covid-19 on project budgets. As you can see, the majority of respondents confirmed that their projects have not been impacted by CV-19. The consensus was that at the beginning of the pandemic in March 2020 there was a significant impact, and a lot of projects were paused until there was more clarity on where the budget had to and could be best used. As we have adjusted to living in this ‘new world’, the majority of projects have been taken off-hold and budgeted for again. It is expected that there will almost certainly be a schedule delay to projects due to CV-19 and therefore a cost implication.

We discussed the plethora of information that is available on the internet around project financials. Below, you can find a useful list of articles, books, and videos:

In summary, there is no perfect approach to project financials – it depends on your organisation’s ways of working and what works best. Collaboration and data accuracy are key. If you’d like to find out more about how to effectively manage and report project financials, then please contact us.

Our PMO Community Events are held bi-monthly, and we make sure that the topics covered are relevant and that sessions are engaging and interactive. We asked attendees what topics they would like to be covered in future sessions and the clear winner was embedding Lessons Learned, so this will be the focus of our next community event. Keep an eye on our website for further information.

Would you like to become a PMO Practitioner and join us at one of our next PMO Community events? Find out more information here.

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