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How can you develop your financial management skills as a PM?

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As a project manager, you need to manage not only the scope, schedule, and quality of your projects, but also the budget and the financial performance. Financial management skills are essential for ensuring that your projects deliver value to your stakeholders, align with your organization's strategic goals, and comply with the relevant standards and regulations. In this article, you will learn how to develop your financial management skills as a PM by following these six steps:

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Fabio Turel

Strategy and Project Management | Top10 Thought Leader on Thinkers360
Paulo T.

Senior Finance Executive | Finance Director | Senior Finance Manager | Controller | SSC Leader | CRC | AIA | MBA | ACCA…
Giovanni Sisinna

??Portfolio-Program-Project Management, Technological Innovation, Management Consulting, Generative AI, Artificial…

1 Understand the basics

Before you dive into the details of financial management, you need to have a solid grasp of the basic concepts and principles that underpin it. These include accounting, budgeting, forecasting, cash flow, variance analysis, cost-benefit analysis, return on investment, and risk management. You can learn these basics by taking online courses, reading books and articles, or consulting with your finance department or mentors.

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Sunny T.

Senior Manager | Group CI Practitioner | Chair - PMAS | Member of the Board - IPMA CVMB
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Different organisation could be having different approach and mechanism for tracking project finances, start to understand them before anything. The best approach is to study them and map it using historical example from the organisation. Make observation and discuss to determine if that’s what happening.

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2 Know your project's financial objectives

Every project has a financial objective, whether it is to generate revenue, save costs, improve efficiency, or create social impact. As a PM, you need to know what your project's financial objective is, how it aligns with your organization's strategy, and how it will be measured and reported. You also need to communicate this objective clearly to your team, sponsors, and stakeholders, and ensure that it guides your decision-making throughout the project lifecycle.

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Giovanni Sisinna

??Portfolio-Program-Project Management, Technological Innovation, Management Consulting, Generative AI, Artificial Intelligence??AI Advisor | Director Program Management @ISA | Partner @YOURgroup
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In my opinion, proficient financial management extends beyond theoretical acumen. ?? Prioritize Practical Application Emphasizing real-world scenarios ensures tangible, applicable skills development. ?? Explore PM-specific Financial Software Tailoring tools to PM scenarios enhances budget and forecasting accuracy. ?? Synchronize with PM Methodologies Integrating financial strategies within PM methodologies like Agile, ensures consistent financial oversight. ?? Optimize your financial skillset by intertwining practical applications, using specialized PM financial tools, and embedding financial strategies within chosen PM methodologies. This triad propels both theoretical and applied financial prowess in project contexts.

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3 Plan and track your project budget

One of the most important aspects of financial management is planning and tracking your project budget. This involves estimating the costs of your project activities, resources, and deliverables, and allocating them to your project phases and work packages. You also need to monitor and control your actual spending against your planned budget, and identify and manage any deviations or changes. You can use tools such as spreadsheets, software, or dashboards to help you plan and track your project budget.

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Sunny T.

Senior Manager | Group CI Practitioner | Chair - PMAS | Member of the Board - IPMA CVMB
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Your organisation could be using ERP solution such as SAP. However, it’s advisable to have a separate tracking on Excel. - There might be delay in the updates and you need the latest number to make critical decision. - This serves as an additional copy for you to perform check and balance. There’s no certainty that the system is always right. - It helps you to gain your understanding on how the numbers are calculated to ensure your budgeted cost is correct and easier for you to estimate your budget at completion.

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4 Analyze your project's financial performance

Another key aspect of financial management is analyzing your project's financial performance. This involves comparing your actual results with your expected results, and evaluating the impact of your project on your organization's financial indicators, such as revenue, profit, cash flow, or return on investment. You also need to identify the root causes of any variances or issues, and take corrective actions or implement improvements. You can use techniques such as variance analysis, earned value management, or financial ratios to help you analyze your project's financial performance.

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5 Report and communicate your project's financial status

As a PM, you need to report and communicate your project's financial status to your team, sponsors, stakeholders, and other relevant parties. This involves preparing and presenting financial reports that summarize your project's budget, spending, performance, and value. You also need to tailor your reports to the needs and expectations of your audience, and use clear and concise language, charts, graphs, or other visual aids to convey your message. You can use templates, standards, or best practices to help you report and communicate your project's financial status.

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Fabio Turel

Strategy and Project Management | Top10 Thought Leader on Thinkers360
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In large organizations, there are clear protocols to report the financial status of a project. These often include an accurate report about actual costs. But the PM must not only know about expenses incurred so far; additionally, they need to: 1. have reliable information about upcoming invoices; 2. anticipate future financial needs to achieve the project's goals, by comparing what has been achieved to the expected results. With this information, a Project Manager can develop a forecast of the final costs. This forward-looking projection is a key asset for decision-makers, especially if there is a risk of exceeding the budget. Going over budget is undesirable, but early awareness mitigates its negative impact.

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6 Learn from your project's financial outcomes

The final step in developing your financial management skills as a PM is learning from your project's financial outcomes. This involves reviewing and reflecting on your project's financial results, feedback, and lessons learned, and identifying what worked well, what didn't, and what can be improved. You also need to document and share your findings and recommendations, and apply them to your future projects or professional development. You can use tools such as surveys, interviews, or audits to help you learn from your project's financial outcomes.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Paulo T.

Senior Finance Executive | Finance Director | Senior Finance Manager | Controller | SSC Leader | CRC | AIA | MBA | ACCA part-qualified |
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To become a successful you must understand project finance and project management techniques. Managing risk, effective communication, working and working in different projects taking experience to learn are essential steps. Additionally, understanding project management techniques like PRINCE2 and Agile. Effective communication is crucial to stakeholders.

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How can you develop your financial management skills as a PM?

1

2

3

4

5

6

7

1 Understand the basics

2 Know your project's financial objectives

3 Plan and track your project budget

4 Analyze your project's financial performance

5 Report and communicate your project's financial status

6 Learn from your project's financial outcomes

7 Here’s what else to consider

Project Management

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How can you develop your financial management skills as a PM?

1

2

3

4

5

6

7

1 Understand the basics

2 Know your project's financial objectives

3 Plan and track your project budget

4 Analyze your project's financial performance

5 Report and communicate your project's financial status

6 Learn from your project's financial outcomes

7 Here’s what else to consider

Project Management

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