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Project finances – this is what you need to know 

There is nothing easier than exceeding the budget when running projects and there is nothing more difficult than having sensible project finances to support the project. Therefore, you will get a few tips on what to do to get the project budget match reality.

1. The start of the new project is crucial. Before you spend money on anything, it's wise to explore the experience of others in case studies and surveys. If you can get hold of this kind of investigations, you are automatically on the right track towards keeping a watchful eye on your project economy.

2. Look closely at what you do and why you should do it. There can be stressful parts of the project that you don't really need. Make sure that each part contributes to the end result and isn't included just because no one bothers to question it. Everything must be justified.

3. Evaluate each part of the project, both in terms of what the part contributes with as well as what it costs.

4. Beware of what you are saving money on. It's easy to cut costs and postpone certain things just because they are scheduled far into the future.
It could also be about skills. You may want to let go of an external consultant because you feel that “you can do this job yourself”. Cut down on costs, but make sure that you can really handle the tasks yourself. If you can't, the additional costs will exceed the savings and that's, of course, poor project economics.

5. Teach everyone involved in the project about economics. It should be everyone's responsibility to ensure that the budget is not just a project manager problem.

6. Break down the project into smaller and therefore more accessible economic parts. If you don’t assign a lump sum of money for each little part of the project you can quickly lose control over the big picture. Project finance is about ensuring that everyone involved handles the finances for the project. If part one costs 200 000, then it can't be allowed to cost more than 200 000, even though the total budget has over 2 000 000. Let people take responsibility for their own financial parts.

7. Update everyone concerned about the economy in such a way that everyone can understand the information. No hassles here. This is how much everything has cost so far and this is how much money we have left. Everyone involved that is responsible for part of the project's economics should be able to tell you what their particular financial situation is like (even if they’re woken up and asked this at 3 am).

8. Make sure that your project manager and person responsible for the project finances both have simple and available communication paths. The people planning the project economics can't hide!

9. Establish simple ways to alert people when things that entail greater costs occur. If the project members act quick, alternative solutions will be easier to find and they will have more time to deal with the situation at hand. If you don't have the time and need to buy a solution right away it's usually not the best, neither the cheapest solution that comes in handy.

About the author

Stefan Ekberg has worked in marketing for small business for 20 years and has written around 30 books on how small business owners can market themselves with limited resources. . In 2012 Stefan was nominated as Entrepreneur of the Year in Stockholm.

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