As more and more businesses seek to reduce costs one area that is a likely candidate is that of the financial staff supporting projects of work.
As centralisation and outsourcing continues to be a key driver in cost reduction in many large firms, what is often cut is what is seen as the "non-adding" value staff. The issue arises is that these staff are usually the ones who are out of site of the head finance managers, work numerous hours on assisting in the delivery of projects and yet are not really seen by the "latest" re-organisation as adding value. They will insist that a light-touch financial management from a central finance function will do just as well.
The Project Financial Accountant or Financial Manager is one such staff member. Before I launch to the project accountants defence it has to be noted that having the wrong finance manager in charge of project financial matters is as good as having nobody and therefore is "no value added", and should go. The problem is that senior management has either little care or little knowledge about what it is like to correctly financially manage a large programme of work. They consider their FX manager controls 250m worth of foreign exchange in the year we only need one of him or her, so why for a 50m programme of work do we need a full time accountant. Possibly you don't however that is another debate for another day you will at least need part of one!!!
The result is that all the financial management of the programme is handed over to the Programme Director who will in turn hand it over to their Programme Manager. Both may or may not have sat through the half day session on project finance within Prince or PMI, and both will be of reasonable intelligence so what is the worry the finances are in good hands!!!
Let's look at it from a more realistic direction why you need a strong Project Financial Manager:
A Project Manager is not a Financial Manager - they are fully responsible for their project - however financial control is not their key skill.
Most companies will require some form of upwards reporting of the project monthly financial results these are always complicated ways again not the usual world for your PM.
Financial management (no matter how financially astute they are) will always play second fiddle to "project delivery" on a project managers "to do" list.
The loss of detailed analysis and review by financial staff results in missed opportunity and cost avoidance. As a real life example CJM Project financial Management Ltd recently worked with the Project Director of a global programme reducing the original estimate of an IS consultancy and development firm by 350,000. It was a good day at the office.
These large projects are in the scale of FTSE 350/250 companies yet many companies and public bodies will only provide a light touch financial support to them - we would not expect such a company to run without adequate financial support - why do we allow projects.
Management decision-making is impeded, as there is no financial support to produce robust, relevant and detailed reporting to the steering group or other management teams.
Minimal financial support during business case creation can result in initial budgets being wrong - resulting in over / under estimates of funding in the financial year.
Relationship building and being part of the project enables greater understanding and greater control and provides the Programme Director access to specific financial direction and advice - light touch removes this ability.
Dedicated finance managers provide a faster reaction to issues, which may have financial implications. This can be done via creation and delivery of project financial risk and opportunity trackers - this approach mitigates risk and drives opportunity.
All in all analysis on hiring the correct Project Accountant as part of the core project team will, if hired correctly and with the correct skill set behind them always deliver a project, business or government department considerably more benefits than their cost. Think before you cut that project financial accountant from your headcount you will regret it. Light touch is sometimes as good as no-touch.
About the Author; Colin McNally is a Fellow of the institute of Chartered management Accountants with over 13 years experience in Blue Chip companies. He has now founded CJM Project Financial Management Ltd, and copyrighted the Pathfinder Project Financial Management Methodology. Pathfinder is a methodology, which advances the current thinking on project financial management. You can read more at www.project-financial-management.co.uk .
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