AXELOS ProPath, the world's most powerful project, programme and portfolio best practice certifications

Project cost management and the PMO

Sharon Clements
June 7, 2011

We require our project managers submit status reports on time, adhere to company methodology, come under budget, meet baseline go-live, produce quality deliverables, keep stakeholders happy… shall I continue?

On any given day a project manager can be called upon to be a leader, negotiator, resource manager, strategic planner, PR specialist, reporting analyst, technical adviser, scheduler, risk mitigator, change and communications manager, mediator… and project accountant?

Whatever organisational structure project managers work under, the task of managing costs to budget is never easy and can be time consuming. So what if we left it all with the finance specialists to manage; they love numbers, right? Would that make our project lives easier?

When it comes to projects, the finance department’s focus is primarily on what hits the general ledger. However, as project professionals we also need to track the ‘true’ cost of projects, as opposed to the ‘actual’ costs. This enables us to measure forecasted effort against actual time spent. A contractor may work a 50-hour week to complete an activity, yet only bill for 40 hours, or a permanent SME may not be costed to a project at all. Finance, on the other hand, can only report on time invoiced.

Ever had the debate with finance as to why you need to manage costs across a program of work, while they only see individual cost centres? You may run cross-divisional projects, but finance is only concerned with individual department budgets; are you able to report on both? Can’t agree on CAPEX/OPEX guidelines? Having difficulty with the timing and prioritising of funding releases? Many finance areas don’t understand the dynamics and complexity of projects. So who will take the time to understand both the needs of finance and projects?

Leaving it all to finance may not be as smooth sailing as we’d like; leaving it with the project managers just creates more ‘noise’ for them to deal with.

The solution: your PMO. Our project managers are busy focusing on successful project deliveries. Our finance friends have their eyes on the bottom line. The PMO is perfectly placed to be the alternative, a conduit between all key parties.

By having access to both true (effort driven) costs as well as those processed through accounts payable, the PMO can ‘slice and dice’ project financials in any way for the project manager, management and finance. The establishment of a central project cost control system can further enhance this capability.

Changes in accounting guidelines can be tracked through the PMO and communicated to project managers as part of standard project procedures. Your PMO becomes the central source of cost management information and the facilitator of financial processes e.g. set up/close GL codes, raise purchase orders, accruals, rolling forecasts. Processes are streamlined by minimising the number of resources engaging with finance.

Established with the right skills set, the PMO can manage project costs with dedicated attention to detail and consistency. The project managers gain an insight into their true project costs, assisting them with current and future project planning, while having visibility of their go-live figures against approved budget. You’ll also provide relief to finance as they will not have to speak to every project manager every week.

Building upon the standard set of PMO governance, tracking and reporting, it is in areas such as cost management that your PMO can provide supplementary ‘value add’ activities to make the project manager’s day a little easier.

Naturally, project managers still need to be engaged in the cost management process and have visibility of their project financials, but taking away the ‘grunt’ work frees them up to focus on their deliverables and any potential project showstoppers as they charge towards go-live.

Sharon Clements
Sharon Clements is a PMO consultant specialising in PMO/Program Office establishment and management, governance, reporting and analysis, resource management, financials, communications, risk and issues management and process improvement.She is also a part owner of Dusty Cowgirl Designs, a graphic design, photography and art business.
Read more