CASH FLOWS
Just as project managers must secure the availability of the project team members and the materials or equipment required for the tasks, they must also secure the project cash flow availability. While some contractors will wait until the completion of the project to receive payment, others must be paid when they have finished their assignment. Still other contractors may require periodic payments during the course of the work. Some materials and equipment may be available within the performing organization but other equipment must be leased or rented. And materials must be ordered from suppliers who have their own payment terms.
Project Cash Flow Forecast
Having contractors stop work because they haven’t been paid or suppliers refuse to deliver necessary items because they haven’t been paid is the kind of mistake good project managers don’t make. These project managers always develop a forecast of the project cash flow. This can be developed in an Excel spreadsheet but the easier way is to use project schedule software. Professional-level software gives you the ability to forecast the cost of contractors and materials directly from your project schedule. As an example, from the schedule you could identify the materials that have been delivered, the equipment that has been leased and the professional or consulting fees the project will have incurred at the end of each month. Having this data allows you to discuss the project cash flow requirements before consultants or vendors have gone unpaid and stopped work.
Project Cash Flow Problems
Executives who are owners of the project should approve the cost benefit analysis, the project plan and the required cash flow before work starts on the project. If that doesn’t occur, problems like this one will arise. During the execution stage, the PM submits a request to pay a supplier. The finance manager replies that there is no cash! project cash flowThe project manager argues that the executives approved the project budget. The finance manager agrees that is true but he cannot reserve all funding amounts at one time. As a result, this problem affects the entire project duration. This is an example of not planning for cash flow during the project planning phase. The PM should have gotten the finance manager’s commitment about payments.
Procurement Management
In Procurement Management Planning, we plan how we will go about procuring every resource, human or material, that we’ll need to contract for in order to complete the project. We also specify the kinds contract we will use and may even draft them before we select the Vendor. If we’re asking contractors and suppliers to submit bids we identify the selection criteria we will use before the request for proposal or even sent out. This kind of detail planting protects the procurement process from the unethical and even illegal things that can happen during the procurement process. If the criteria for selecting the winning vendor is established early, it’s very difficult for people of the organization to try and change those criteria to the benefit of a friend or acquaintance. Similarly we didn’t five the skill sets in the people we’ll be on the project team. With all of these decisions made before we begin to execute the project plan we are much more efficient and have better making decisions on the fly as we purchase things.
Execution Strategy
What is strategy execution? Strategy execution is a hot topic in management today. In fact, the Conference Board’s recent Survey of CEOs revealed that chief executives are so concerned about strategy execution that they rated it as both their number one and number two most challenging issue. For anyone who’s tried to execute strategy, this finding should come as no surprise: it’s estimated that more than 60% of strategies are not successfully implemented.
When asked to define strategy execution, most managers respond with statements like, “It’s the successful implementation of a strategic plan” or “It’s getting your strategy done.” While these perspectives are certainly valid, they aren’t very helpful in terms of understanding what needs to be done to actually drive business results.
