Project management is an art form. Just as painters express their creativity on canvas, project managers skillfully juggle tasks.
But project management is more than task wrangling. Nothing brings a project to a screeching halt faster than financial strain. That’s why keeping a tight grip on the project finances is paramount. You don’t need Scrooge McDuck controlling the purse strings. But you should have safeguards to prevent overspending, optimize resources, and drive project success.
Having the right financial management tools and procedures in place can help ensure a project’s financial wellness. How? By allowing project managers to create detailed budgets and track expenses in real time. With a solid financial management tool, teams have full transparency to financial data so there are fewer surprises and project overages.
Are you ready to take control of your project finances? Keep reading as we cover how to choose the right financial management software, navigate financial management information systems, and implement financial management best practices in your projects.
Related: How to improve budgeting and resource allocation
The Role of Financial Management in Project Management
Here’s the cold, hard truth: It doesn’t matter how happy a client is or how well a project is executed. If a project goes into the red, it’s a major liability. Continuous budget overages lead to reduced profit margins and cash flow issues. As companies feel the pressure, so will their employees and clients.
Financial management keeps these issues at bay. When projects have a well-defined budget, project managers can better establish the scope, objectives, and key milestones. Ultimately, this keeps projects aligned with organizational goals to ensure project success.
However, only 43 percent of businesses say they complete projects within the set budget. By the time a project gets out of hand, it’s often too late to get the finances back on track. Financial management is proactive, not reactive, which is why many companies struggle to make the numbers work.
An accurate budget sets the foundation for a project. It’s ground zero for informed decision making. Budgets give project managers a gauge for monitoring expenses, identifying cost overruns, and making timely corrections. If the project scope, resources, or timeline change, project managers have the data they need to quantify the financial impact.
Accurate budgeting also helps project stakeholders feel more confident in how a project is being managed. And every project manager knows projects go more smoothly with happy stakeholders.
Financial Management Software in Project Management
Some teams use Excel spreadsheets to track their budgets. While spreadsheets can be ideal for managing a personal budget, they aren’t well-suited for project budgeting. Spreadsheets don’t give team members full online visibility for collaboration. As your project volume increases, spreadsheets can also become time-consuming and introduce data errors that throw off your budget.
Financial management software enables project managers to monitor project progress with actual project costs. They can track team members’ efforts in real time, analyzing the team’s project efficiencies. Project managers have all the data they need in one place, so they don’t have to worry about missed details or spend hours ensuring spreadsheets get updated accurately. Invoicing clients and monitoring cash flow are significantly easier, and they no longer have to dread the financial reconciliation process.
Ready to see a few examples of financial management software?
QuickBooks
Known for its bookkeeping software, QuickBooks is great for overall financial tracking and management. With QuickBooks, you can start with the features you need—QuickBooks Payroll, QukckBooks Time, etc.—and add on features as you go.
QuickBooks Online makes it easy to track business expenses and keep track of your money. By tracking your expenses throughout the year, QuickBooks helps you predict and manage your cash flow. You have instant access to key financials like income, expenses, outstanding invoices, and more.
Managing projects in QuickBooks Online also gives you valuable insights into which projects are making money. Through clear dashboards and reports, you can see your profitability data, identify areas in which profits are trending from project to project, and make smarter business decisions.
FreshBooks
FreshBooks is a financial management platform that offers easy-to-use accounting and bookkeeping features. Invoicing and financial reporting are the standout features in FreshBooks. You can build and send invoices in seconds and run your billing, books, and payroll all on the same platform, so you don’t have to bounce around from program to program.
Remember how time-consuming it can be to export data from spreadsheets? FreshBooks automatically crunches the numbers for you, allowing you to access important reports like profit and loss and avoid the math headaches. Insightful dashboards and reports help you see how your business is performing at-a-glance, and during tax time, your data is all in one easy-to-access place.
Xero
If you’re looking for real-time budget monitoring and financial analysis, Xero is great for that. It offers convenient tools for project planning, budgeting, quoting, and invoicing. When you want to track costs and manage a project budget, you can record time using Xero’s built-in timer or location-based job tracker. You can also set up job tracking with project accounting automatically integrated with Xero.
When you’re ready to crunch the numbers, view project accounting metrics and monitor progress against a project budget. Xero allows you to keep track of everything in one place, and if a project changes unexpectedly, you can make quick updates so invoices are accurate and up to date. Customizable reports give you access to the data you need, empowering you to make more confident business decisions and monitor trends.
Financial Management Information Systems (FMIS)
As we covered, financial management software consists of standalone accounting or finance-specific applications. This software handles tasks like invoicing, payroll, and general ledger.
Financial management information systems (FMIS) are more comprehensive systems that integrate financial data across the organization, connecting financial data with other operational data. FMIS offer broader functionality and advanced reporting and compliance capabilities. Within a government agency, for example, project managers may need more controls and compliance features for audit trails and to support government-specific accounting standards.
Here are some financial management information system examples:
SAP FI (Financial Accounting)
SAP offers various solutions for comprehensive financial management. With the accounting and financial close solution, companies can automate and streamline their finances, from reconciliation and consolidation to compliance and reporting.
Through automation, project managers can plan and manage financial close to improve governance, compliance, and transparency. They can enable finance transformation and innovation without disrupting their ERP legacy systems. If you face complex regulations, SAP helps you manage volatility and foster accounting compliance.
Oracle Financial Services Software
Oracle is an ideal solution for financial services institutions looking for a leg up in how they use technology to drive growth. The platform gives corporate banking, retail banking, and other financial services companies end-to-end pricing and billing solutions.
Complex enterprises like financial services benefit from Oracle’s highly-configuable revenue management system and billing solution. Organizations can manage client relationships efficiently with a single source of truth for pricing and billing. They can also drill down to the details to extract insights and make more informed decisions.
Best Practices for Implementing Financial Management in Projects
Project management workflows and financial management tools go hand-in-hand. PMs can see actual costs and budgets as teams complete work, which means they have real-time visibility into a project’s financial health. They can also monitor and even predict potential financial issues before they completely disrupt a project’s progress.
Let’s say a PM knows a project is already exceeding its budget before completing the first phase. They have the data at their fingertips to make adjustments and get the budget back on track.
While financial management software is invaluable for project managers, managing a project budget is still a monumental task. Here are a few best practices for leveraging project management solutions for budgeting.
Conduct regular financial reviews and analysis.
Budget overages are sometimes undetectable until a project spins out of control. This is why project managers should always have a pulse on expenses. If there are cash flow issues or underestimated costs, PMs have to take quick action to prevent small issues from escalating. Regularly reviewing the financials is preventative measure that can helps teams avoid frustration and failed projects.
Integrate financial data with project timelines for more accurate forecasting.
Having a 360-degree view of your business data enables teams to see past and current performance metrics. When project managers can see that data alongside project timelines, they have a better idea of where the finances may fall off the rails. If the team needs to pivot, they have the data to support their decisions.
Utilize dashboards for real-time financial visibility.
Data tells a clear and compelling story. By setting up dashboards to monitor important project metrics and trends, you don’t have to scrape data whenever you need it. You can see how the finances are doing throughout the entire project.
Choosing the Right Financial Management Tools
When you’re ready to choose a financial management software and FMIS, what factors should you consider?
Company size: If you’re a small- to mid-size business, your needs will look different than those of a large enterprise.
Project complexity: Think about your current and future needs and about the types of projects you handle. For complex projects, you might need customizations to keep project finances on track.
Specific financial management needs: Define the features and capabilities that are essential to your organization. Do you need inventory management or cost accounting? Regulatory compliance?
Integration capabilities with other project management tools: Remember, the goal is to make it easier, not harder, to manage project finances. If your team relies on specific project management tools to streamline projects, you’ll want to ensure those tools integrate with your financial management software or FMIS.
When Effective Financial Management Leads to Project Success
Budget management is critical for Diversakore, a company that helps construction companies reduce their build costs. Company leaders were using spreadsheets to estimate project costs and manage estimation data. However, those spreadsheets couldn’t optimize data insights and opportunities. Diversakore also struggled to collaborate and share information with external stakeholders.
They built an estimate app with Quickbase. It enables Diversakore to automatically calculate cost basis and value engineering data, the cloud-based system simplifying project collaboration across devices and browsers. Since implementing the app, Diversakore has reduced the time it takes to create estimates by 50 percent, and they can deliver even more cost savings to customers.
A busy commercial photography studio, OMS Photo, also struggled to keep track of all the people, props, equipment, and expenses associated with jobs. They tracked their financials in QuickBooks Online, but struggled to tie the financials back to specific jobs.
Quickbase Sync for Cloud Apps enabled OMS Photo to create fast, flexible reports on job profitability. Reports update automatically so the OMS team has access to real-time expense tracking by project. As a result, OMS Photo has a much clearer picture of the business. They can quickly pay vendors and keep cash flow moving.
Conclusion
Financial management is not about penny-pinching your way to project success. It’s about planning proactively, making more informed decisions, and delivering projects of value. With the right tools in your arsenal, you can make sure every project your company delivers drives profitability.
Now that you know more about financial management software and best practices, you’re well on your way to mastering financial project management. Explore some of the financial management software and financial management information system examples above. Then reach out if you have questions about how Quickbase integrates with these powerful tools to help eliminate gray work!
Additional Reading and Resources
