Project Financial Management is one of the strategic processes in a project that aims to plan, direct, monitor, organize and control monetary resources of the project throughout its life-cycle. It is based on the analysis of monetary resources to ensure that every dollar invested in the project is allocated to and spent on right project activities.
Along with other strategic processes (such as risk management, time management, change management, etc.) project financial management aims to ensure successful project delivery. Its ultimate goal is to ensure balanced involvement, distribution and consumption of financial resources throughout the project life-cycle. This goal is accomplished in the following four steps:
- Planning: conducting an analysis of the project environment to identify and estimate financial needs. It results in developing a finance management plan.
- Allocation: distributing funds among project activities to ensure that every piece of work is provided with adequate monetary resources.
- Monitoring: supervising and tracking status of project budget and financial resources to ensure they are on-course and on-schedule in meeting project objectives and performance targets.
- Controlling: analyzing and interpreting project financial status to ensure achievement of desired return on investment.