9 Means of Reconciling Funding and Costs for Projects
Once costs are estimated, you need to verify that there is a need to verify that there is no discrepancy between the funding committed and the costs of the work to be done.
You want to be able to reconcile the funding with the actual costs to make sure that your project stays on track.
The sponsor planned to spend a certain amount of funding on your project and is expecting you to deliver the desired result on time and on budget.
It is your responsibility to make sure that the sponsor’s expectation is in alignment with the reality of the cost of completing the work or to find an acceptable solution for funding constraints by making necessary adjustments to the budget and the schedule.
Your ability to reconcile funding and cost will be critical to meet real-world project challenges like this.
Reconciling Funding and Costs…
Frequently, it is only at this point in a project, after you established a cost baseline, that funding deficiencies become apparent. It is your responsibility as a project manager to reconcile on costs with the funding that has been approved by the sponsor.
#1 Gather the materials
There is a need for you to gather all the materials that you need in order to reconcile funding and costs for the project.
Some of those documents include project budget and schedule documents, the project scope statement which contains information regarding funding constraints.
You also need the cost estimation and activity cost estimates so that you can monitor expenditures against estimates. You also need the WBS so that you can monitor the deliverables.
You need the contract documents so that you can monitor the commitments and requirements that must be met.
#2 Map the project budget
You need to map the project budget, the scope statement, and the schedule to the funding available.
You need to make sure that the promised work and the promised funding are in alignment.
If there is already a clear disconnect between the work that has been promised and the funding that has been allocated, you must alert the sponsor now.
You need to identify alternatives. if funding deficiencies are.apparent, look for suggestions of alternatives that the sponsor could agree to, which are typically a reduction in the scope, an increase in the budget, an extension of the schedule or some combination of those.
#3 Involve the Project Sponsor
Reconciliation requires good communication. Now is the time to discuss funding limitations, expectations, changes to to the project scope, and options for resource allocation and schedule revisions.
Work with the sponsor on an ongoing basis from this point forward to adjust the project*s scope, schedule and the cost to be in. line with the funding that the sponsor is willing to formally commit.
Make sure that the sponsor is apprised of changes in resource allocation that may affect deliverables.
#4 Partner formally with the company’s financial decision-makers
You have to discuss with the initial project overall cost validation and mapping of financial transactions for cash flow reasons.
You need to discuss the ongoing monitoring of the project’s financial performance to enhance the financial integrity of the project.
#5 Reconcile funding
There is a need for you to reconcile funding with costs on an iterative basis throughout the project. Many problems can be avoided through careful monitoring and adjusting resources in response to the changes that will arise.
#6 Actual costs
Actual costs may exceed the estimated costs during different time frames. Keep the sponsor (and the external customers, if there is one) apprised of any additional cost that is incurred.
#7 Monitor spending
As the work begins on the project, you will need to monitor expenditures both in terms of cash and in terms of effort, or hours of labour.
Monitor and document unexpected expenses as they arise, such as rework that may be required. Unexpected expenses will affect the budget and schedule and must be discussed with the sponsor.
#8 Monitor schedule
As the works begin on the project, it will be your responsibility to monitor the activities as they are completed or partially completed so that you can identify and adjust the delays before the detail of the project.
#9 Monitor the risk
You have to monitor the risk that has been identified for the project. After the sponsor, if those risks become reality, so that appropriate changes can be made to the scope of the schedule.
Make sure that any risks that arise during the Reconciliation are reflected in an updated risk register.
A key decision-maker in your company, Paul, has an ambitious plan for a significant redesign of the company’s website. He wants the site to incorporate new functionalities, including the ability for customers to access your site and order products, view streaming videos about your products, and access inventory.
This is a dramatic change from the website your company currently has. You collect the project budget, the scope statement, and the schedule and compare those specifications to the funding that has been allocated.
Immediately, it becomes clear that the small amount of funding allocated is out of the line with cost estimate received. The company committed less than half the amount of funding that will be needed.
You go directly to the Project Sponsor to discuss the discrepancies and find alternative ways to reach the objectives of the project.
Throughout the lifecycle of the website redesign, you monitor spending closely, because it is clear that the sponsor’s ambitions threaten to overwhelm the available funding.
Now your take on this argument.
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