Cost and Value Management in Projects, 2nd Edition

Chapter 7Financial Management in Projects

Learning Objectives

After completing this lesson, you should be able to:

• Define project financial management and explain its key features.
• Discuss project accounting and its role in managing project finances.
• Discuss the main features of, and the difference between, financing a project and project finance.
• Explain the different types and sources of finance for a project.
• Outline the various steps involved in the process of financial management of projects.
• Identify with examples the possible financial risks to a project.

Project funding and financial management have a significant impact on project cost, cash flow, and, more importantly, success. And yet, very few project managers have even a rudimentary understanding of this important element of overall project strategy. It is important to recognize that the means a firm uses to finance its projects can have a huge impact on their ability to successfully control costs, manage cash flow, and maintain an acceptably positive degree of value for the project. Put another way, when we make errors in selecting the manner in which we choose to finance a project investment, it can have a great impact on the ultimate worth of that project. Thus, it is necessary, within the scope of this book, to make some general mention of the role of financial management in successful projects.

In this chapter, we discuss project funding and financial management, including some of the most important concepts ...