Financial Management of Projects v2 - MM 2003

Financial Management of Financial Management of ProjectsProjects

Pia Niittymäki & Gil FariaPia Niittymäki & Gil Faria

Overview of the program

• General– vocabulary

• Legal issues• Budget

– exercise• Treasury• Timeline• After the project

Background

What is a project

• Something happening for a limited time

• Has a group who is responsible for planning and realizing plans

Basic IFMSA project vocabulary

• mission• goal• objective

• project proposal & final report• fundraising• budget

Inside the team

• Estimate the number needed– divide the tasks– keep them informed

• OC/Staff• Partnership with externals

Think like a funder

• what is the purpose of your organisation, will you make them look good

• are you professional• can you handle the money

properly

How to prepare

• make sure you have the right to use your organisations name

• make sure your partners have done the same and that you have a clear contract with them

• make sure other people in your organisation know and accept what you are doing

money, money, money…

Financial Financial Management of Management of ProjectsProjects

““No major project is ever completed in No major project is ever completed in time,time,

within budget and with the same within budget and with the same people thatpeople that

started it. Yours will not be the first.”started it. Yours will not be the first.”

Project Criteria

Absolute criteria • is your project worth it at all? • will it achieve something that will

justify the energy, money and time spent

Relative criteria • is it worth it this much?• is it a better way to achieve set

goals, are the costs justifiable

Defining the need for funds

• Define your objectives as clear as possible, using simple, understandable terms

• Key questions:– is it rational– is it valid– is it relevant – is it self-sustainable – is it applicable

Financial Financial management of management of projectsprojects

BudgetBudget

&&

Cash FlowCash Flow

Budget

• A budget is a plan for the expected income and expenses, over a period of time.

• Your budget must inspire confidence and show your project to be both realistic and trustworthy.

Budget

• The longer the planning period, the more inaccurate the forecast.

• Forecasting of large inter-related items is more accurate than forecasting a specific itemized amount. – When a large group of items are forecast

together, errors within the group tend to cancel out.

The budget

• Must be able to be revised quickly and easily. – An easy to use computer spreadsheet

(Microsoft Excel ®) is more than enough to all you possible needs.

• Budgeting must be linked to strategic planning since strategic decisions usually have financial implications

Some tips about budgeting

• Be pessimistic in project costs and incomes. Usually use lower incomes / higher costs than you think.

• Don’t inflate your budget, because potential sponsors…are not stupid and will notice this easily !!!

• Do not overshoot the expenses.• Identify goods and services that you

could raise rather than cash

Some tips about budgeting

• The income is often uncertain when you start a project, but the expenses can often be calculated in detail .

• Try to find out the real costs rather than estimating them

• Make a minimum-maximum budget for your project.

• Remember to add 10% unexpected costs to the budget

How to do a budget ?

• Round up/down your figures.• Try to be as exactly as possible.• Ask someone to review your

numbers.• Try to think of everything

– All expenses you may have– All possible funders

• Make sure it has no profit… or debt.

How to do a budget?

• Explain how you reached your total figure (include sub-total, unity costs, etc…)

• Make sure the expenditures correspond to the project planning and activities.

• Include all sources of funding (participants fees, your organization investment, grants, etc…)

• Goods and services provided for free, should be listed both in expenditures and incomes.

Budget

• What a budget looks like…

Exercise

• You are planning to organize a NMO meeting in 6 months time. Make a budget as accurate as possible…

• Remember to include:•Sporting events•Social program•Scientific programme•Lodging and food

•Grants•Publicity•Participation fees•Whatever you may think of…

Financial Administration

• Treasurer ≠ fundraiser • Task of the treasurer – responsible for

all the incomes and expenses of the project.

• Especially important in larger projects.• Make sure that all the original receipts

are stored in an organized way.• Keep an account of all expenditure and

income.• Necessity of auditing???

Who can be the treasurer?

• … almost anyone… • Organized and responsible.• Your organization treasurer, or…• Your own project treasurer

• Be sure to have only one person dealing with money… (half the work, half the responsibility…)

Which bank account to use ?

• If possible, have your own bank account – only for the project.

• If you can’t have a new account… then keep to the old one, but remember…– Your organization treasurer should make the

movements,– You should have your own treasurer to keep

track of transactions, budgeting and money flow, as well as to “deal” with you organization treasurer

• If your organization treasurer is in charge of the project money, you can use the same old account.

How to keep account ?

• Register every cash flow of your project.

• You can use your own method, given that:– It’s accurate,– It’s sensitive,– It’s standardized.

• Usually columns with debts / credits• Multiple accounts at the same time…

(bank, cash, etc…)

Keeping account

• Example of cash flow…

Exercise

• You are finally organizing, the NMO meeting, try to make a realistic cash flow sheet.

• Now, you have received a grant, specifically for the scientific component of the event… how will you record it?

• Imagine now, that instead of being to the scientific component, it would be half for that and half for sporting events… how would you do it now??

Timeline

After the happening

• evaluation period• audit• final report

Evaluation

• did you reach what you wanted– feedback from participants– impressions from staff+OC

• evaluation forms– clear questions– free feedback

Audit

• professional/non-professional– treasury– accounting – audit

• investment or a waste of money?

• money left over

Final report

• what you did and • how• information from evaluation• send it to the people you co-

operated with• information for future

generations