Financial Project Management Planning and Budgeting

Question: Discuss about the Financial Project Managementfor Planning and Budgeting. Answer: Introduction: Within the study, the detailed information of various aspects such as finance, planning, budgeting and many more of the project management will be provided. Project can be derived as the temporary process that has a pre-defined start and end time (Kerzner, 2013). In addition to that, the project is also consist of defined deliverable and scope. Therefore, the project management is the process of using the skills, knowledge and tools for making the project a successful one. Project Finance: Project finance can be referred to the long-term industrial project, infrastructure and public services that are based on a limited or non-recourse financial structure (Walker, 2015). In terms of financing the project, equity and debt are used. In addition to that, the expenses of the project is recovered through the project after its completion. Features of Project Finance Transaction: Highly leveraged: The highly leveraged transaction are leveraged with debt accounting for sixty five to eighty percentage of the expense in terms of normal cases. Independent entity with a finite life: It is like the ancient voyage-to-voyage financings. In this transaction, often the project financing depend on a fresh legal component (Turner, 2016). The legal component is commonly known as Project Company. The Project Company has the sole purpose of completing the project that has limited life time. Capital intensive: Project financing are considered as large scale projects that need a great deal of equity capital and debt (Kerzner, 2013). Project Finance Sources: Capital markets: It is the market where the debt and equity is sold and bought. In this market, channel investment and savings among the suppliers of capitals for example institutional and retail investors as well as users of capital such as government, businesses and individuals occurs (Paivi Antikainen, 2015). Loan stock: Loan stocks are considered as the shares of preferred or common stock. These stocks are used as collateral in terms of safeguarding loan from another party. Retained earnings: It can be referred to the internal sources of finance. It is also known as Ploughing Back of Profits (Verzuh, 2015). Other sources of Finance: Other sources of finance are such as bank borrowing, franchising, business expansion scheme funds and government sources. Implications: Capital markets: The capital market provides equity security. This allows issuing market, bond and stocks directly to the investors from the organization. Loan stock: The recognition of highest value in terms of shares of business is possible (Turner, 2016). Retained earnings: The best of this sources is that it is a long term source so funding. Benefits and Risks of Joint-Ventures: In terms of collaborating on short-term projects or strengthening long-term relationship joint ventures are used by any size of organization. The joint ventures has advantages as well as disadvantages regarding long terms business plan and project funding (Paivi Antikainen, 2015). The Benefits of Joints Ventures: If a joint venture gets successful then it can provide following benefits to the business. Allow to increase productivity, grow faster and generate greater profits Enhance capacity Allow accessing bigger resources that include technology, specialized worker and finance (Kerzner, 2013) Enable sharing cost and risk with partners Often it allows organization to grow business without looking investors or borrowing funds. This may be the greatest advantage to the funding of project. In terms of long terms relationship, the marketing products is one of the biggest advantage that joint venture allow organization by allowing using the consumer database. Joint ventures are extremely flexible. The funding of project can be done according to the requirement of the project as well as organizations (David David, 2016). Joint ventures allow the organizations that operate in different nations to collaborate for establishing long-term relationship. Risks of Joint Ventures: Joint venture with other organization is a very complex task. In order to make the right business venture huge effort and time needed to be guided by accurate activities. Establishing communication among everyone those who involved in the project is really a critical process. This affects the business in terms of funding for projects. The objectives of the venture are not always clear to everyone (Killing, 2012). Equal sharing of investment, expertise or assets among the partners of the venture cannot be seen. This has a really bad impact on the long-term relationship among the organization. Definition of these Processes with Reference to PMBOK: Financial planning: The processes that are associated with the phase are as following. Assembling the main points of the project plan from the previous segments of the plan Recognizing the organization structure of the project plan for identifying the person who is responsible for garneting the primary decision in terms of marketing, operations, financial management, legal compliance, production and staffing (Paivi Antikainen, 2015) Recognizing the operational processes that are needed for completing the project The project analyst along with the technical expertises are required to identify the operating system that will assist the organization to complete the project It is essential to recognize the data that is required to turn the previously discussed activities into estimates of balance, income and cash flow statement The final step will be modifying primary estimates and generate iterations on the financial planning regarding to get better optimistic scenario (Verzuh, 2015) Financial control: The processes of the financial control phase are as following. Determining the overall expense of the proposed project is one of the initial and crucial activity Creating a time frame of the expenses on the project (Paivi Antikainen, 2015) The expenses may be proposed on monthly or annual basis Payback period is a type of financial forecasting in terms of calculating the time needed for return of investment (Verzuh, 2015) Administration and record: The phase is very crucial and is the key of controlling the process of the whole management activity. The processes that are included in the phase are as following. The process include keeping track of the processes The linked processes that run simultaneously are stored accordingly (Kayser, 2013) The information are recorded for further activity Financial Management: Financial management plan: It is the activity of determining the processes of achieving strategically objectives and goals by the organization. An organization creates a financial plan as soon as the objectives and vision is set. The activity includes the following Assessing business environment Confirming the organization objectives and vision Recognizing the kinds of resources required for achieving those objectives Quantifying the quantity of resource Calculating the entire cost for each kind of resource (Fitzsimmons Fitzsimmons, 2013) Summarizing the costs for creating a budget Recognizing any issues and risks with the budget set Resource planning: An adequate resource plan includes a schedule that is as descriptive as possible in terms of the information known along with the kinds of resources required for individual activity. Resource estimating is a critical task of this phase and five tools are used for estimating the resources such as following. Expert judgement: This means collecting suggestions from the person who had worked in this kind of project. Alternative analysis: This refers to the process of considering individual options in terms of how to assign the resources (Kayser, 2013). Project management software: The software is very assisting in terms of planning the resources. Cost estimating: It is process of calculating the required cost of the project. In this phase, the information that has been gathered from resource planning is used. Cost budgeting: It is the process of estimating expenditure of the project (Fitzsimmons Fitzsimmons, 2013). Cost control: Involved in controlling costs are processes cantered around planning, estimating, budgeting, financing, funding and managing costs so that the project can be completed within the approved budget. Conclusion: From the above study, it can be concluded that the financial project management and activities associated with this management method is very crucial for any project. Irrespective of the source of the funding, the management process depend highly on the project scope and deliverable. References: David, F., David, F. R. (2016). Strategic Management: A Competitive Advantage Approach, Concepts and Cases. 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