We are going to discuss the Finance of our chapter. We will look at how Finance is managed in the PMI Toronto Chapter, coupling it with an analogous view of PMBOK. Please note that Finance is part of Operations, rather than a kind of Project Management, but I like to draw similar paths to make it easier for project managers and PM practitioners to understand.
To divide and conquer, we have separated Finance into several key elements. Each element is compared with a similar PMBOK chapter(s), although differences are discussed as well. Normally, Finance elements are not considered to relate directly to PMBOK. Here, we are taking an imaginative approach to bring two different subjects together so that people with lots of experience and understanding of project management will have more insight into Finance.
Objectives of Finance
Finance takes care of the financial health of the Chapter. We always focus on a Balanced Approach, which means we are not trying to make a lot of excess after expenses are deducted from revenues, and we will also do our best to control expenditures for each fiscal year so as to not to lose too much. The target is always around ZERO.
With a dynamic environment and various uncertainties in real life, we will find that the outcome can be higher or lower than zero. Also, the strategic planning may require a positive outcome to keep more reserve for the coming months/years, or allow a negative outcome to secure some strategic goals. There are varying margins that the chapter may require for each year or each time period.
Overall, Finance needs to align with the Strategic Planning of the Chapter for each fiscal year in budgeting.
Strategic Planning – Project Charter, Project Scope Management
Finance is part of the core team to plan strategically for the Chapter in the beginning of each fiscal year, and define the Vision and Mission of the Chapter.
In terms of deliverables, the Strategic Planning of Finance is always different from Project Planning, but the idea of defined Objectives is very similar.
Budget – Project Planning, Project Cost Management
The Budget is established for each department/directorate, and, in turn, for the entire chapter for the coming fiscal year and is approved by the Board. When the unexpected happens and we veer off course, the budget may need to be further assessed and re-established in the middle of the year.
This process has a lot of similarities with Project Cost Management: Plan, Estimate, Determine and Control, etc. Re-established budget is similar to revised baselines in projects.
Monitor & Control – Monitor and Control Project Work
Each month, the month-end processing of Finance will be accomplished and Financial Reports created to reflect the health and status of Finance in the Chapter. There are a few things we have to watch for – Cash flow, Income, Expenses, Accounts Receivables, Accounts Payables, Foreign Exchange rates, Interest Income, Interest Expense, membership growth, the recent trends, the future directions, financial ratios etc.
Also, we have to make sure controls are in place and executed as planned to properly manage the processes involved in Finance, such as the collection of revenues, ability to pay vendors, reimbursement of expenses, etc. This protects the overall revenue and expense of each department/directorate and, in turn, the chapter, as a whole, will be forecasted and analyzed each month for performance, lessons learned, and any changes to enhance or remedy situations.
Relatively, Finance has a “fixed” timeline, as month-end and year-end are fixed; whereas projects have a more dynamic project timeline.
Chapter Governance – Project Stakeholder and Governance
Chapter Governance deals with the management of the Chapter and maximizing the value for our membership and activities to our Stakeholders – members, sponsors, vendors and customers. This is similar in nature to the management of Stakeholders in project management.
Year-End – Close Project
By the end of the year, the books will be closed with all entries posted to the General Ledger, taxes paid/rebated where applicable, and finally audited by the auditor. This results in Audited Financial Statements, which will be distributed to members ahead of the Annual General Meeting (AGM) and approved by the members during the AGM. This is very similar in nature to the Closure of the Project, which may require closing of the project account book, lessons learned, final project audits, project evaluations etc.
How can you help
If you are interested in Finance work, talk to us about what volunteer work you can help with.
Steve Wong, B.Sc.(Eng), MBA, PMP, CGA, CMA, has been working as a volunteer of Finance in PMI Toronto Chapter Board since 2014. Also, Steve worked as VP Marketing and then VP Finance in Bruce Branch Board of PMI-SWOC in 2009 to 2011.