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).
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|
|Donor grants Received:|
|– SMILE Trust||43.000|
|Donations & Fundraising||750|
|Vehicle running expenses||14.886|
|Cost of subcontracts||59.135|
|Cost for materials / consumables||4.324|
|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)
5. Keep records
Keep records of your cash book in a safe place.
References & Further Readings
- MANGO (2013) Financial Management Essentials A Handbook for NGOs, Management Accounting for Non-governmental Organisations, Oxford, UK. Available from: http://www.classtoolkit.org/sites/default/files/documents/Mango%20FME%20handbook%20%5Bmain%20text%5D%20%20March%202013.pdf