Tool

Planning and managing project finances

Record financial data in a sorted and classified system and develop financial statements for your project(s)

Managing project finances comprises appropriate methods for making payments and storing financial information. This information should show how the institution has spent its money and where the funds came from (MANGO 2012).

Purpose and link to IQC

Tracking and controlling expenditures can keep project finances under control. In addition, a sound accounting system allows displaying your commitment to transparency, establish credibility, and foster confidence among donors and water users (MANGO 2012).

How to

The following steps, together with the Excel templates for accounting, provide guidance to establish a cashbook for your project.

1.   Establish a Project Budget for each project

Use the ‘Budget calculation’ Excel file (table below) or any other template to summarize the project budget for a specific project.

 

Personnel costs Travel Costs Sub-contracting Materials – Consumables Total cost per Activity
Activity to be performed Number of Days Cost per Day Total Cost Trip Description Trip Cost Item Cost Item Cost Cost
Total Budget Implementation Plan

2.   Clarify authorization of payments

Define procedures for the authorization of payments to provide guidance on the basic principles and safeguards associated with expenditures and making payments. Make sure no one person controls all aspects of the payment authorisation procedure. Different people should be responsible for ordering goods and services, for approving payments, and for processing payments. Where this is not possible due to limited resources, alternative arrangements should be agreed to ensure quality control before the execution of payments.

3.   Establish a Receipts and Payments Account for each project (cash book)

Use the ‘Receipts and Payments Account – cashbook’ Excel file or any other template to summarize the payment transactions for a specific project, which should all be recorded in a Bank (or Cash) Book as and when they are made and incoming transactions as and when received.

The Receipts and Payments report is the simplest of all financial statements. This summary includes details of cash balances at the start and end of the reporting period.

Receipts and Payment: Example

Opening balance cash and bank 2.880
Receipts  
 Donor grants Received:
      – DFID  8.000
      – SMILE Trust  43.000
 Donations & Fundraising  750
 Water fees  13.540
 Bank interest  832
Total receipts 146.122
Payments
 Personnel costs  46.580
 Training expenses  20.588
 Vehicle running expenses  14.886
 Cost of subcontracts  59.135
 Cost for materials / consumables  4.324
 Board meetings  284
 Office equipment  834
Total payments 146.631
Closing balance cash and bank 2.371

4.   Establish a Project Financial Statement

Use the ‘Project financial statement’ IQC-Excel file or any other template to take the budget for the project and compare that with the actual expenditure. See the example below.

The difference between the budget and the actual result is known as the variance and this can tell you a lot about what is happening in a project. Variance figures will be positive, negative or zero, depending on what has happened. Reviewing the financial figures, and in particular the variance column, helps you to understand why you did or did not fulfil financial objectives. Often, project financial statements also show variances as percentages.

Activity to be performed Budget Actual Variance

(actual – budget)

 Variance

%

 Comments

5.   Keep records

Keep records of your cash book in a safe place.

Template

Download

References & Further Readings

 

Last updated 12 April 2018

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