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21 September 2024

What can a Chief Financial Officer teach a Project Manager?

As a project manager, you are responsible for managing resources effectively and keeping costs under control. These are key areas that the Chief Financial Officer (CFO) is interested in, in order to ensure the successful stability and viability of the company. Here are some things a CFO could teach a Project Manager;

Accounting Principles.

As a project manager, you may need to understand accounting practices and be able to explain them clearly to non-accountants in your company. You might need to know when it makes sense to apply accrual or cash accounting principles, and how these principles can affect your company’s financial performance. A CFO will want to know when to recognise the value from your project. Earned Value Management (EVM) is the closest experience that a Project Manager will have. Align the accrual milestones with your milestones to recognise the value together.

Keep track of finances.

Project Managers need to be able to track expenses, revenues, and spend money on investments that increase the value of the business over time, or on planned investments that reduce operating costs over time. You can work together with the CFO to ensure that your project delivers everything that they need and that you clearly communicate these finances in a reliable and periodic fashion.

Understanding Risk Management

Understanding the basics of accounting and financial management can help you understand risk management. In other words, you must be able to identify risks and make informed decisions about them. You should also know when to allocate funds or record losses on specific projects that may not be as profitable.

 

Understand the role of accounting in business performance

As a project manager, the CFO trusts you to understand and manage the financial aspects of the company. This means understanding how accounting affects performance and how it can be leveraged to give your company a competitive advantage. Understanding accounting principles is only part of what it means to be an effective project manager. The other part involves understanding how all departments in your company work together, as well as being able to communicate with all levels of employees. You can also teach these things to your CFO!

 

Estimate expenses and revenue

A finance department is usually responsible for estimating expenses and revenues. Whether your business is large or small, they can teach you how to estimate future costs, the costs associated with operating activities (known as Operational Expenses (or OpEx), such as advertising and marketing costs, and the costs associated with investment projects (Capital Expenses (or CapEx)), such as building a new facility.

 

Manage risk effectively

As with project management, careful planning and an understanding of the risks involved are needed. Risk management is fundamental to a company’s success and can be influenced by factors such as market conditions and historical data. A CFO will look at broader risks than a Project Manager including those in the industry in which you operate. They can teach you how to hedge and diversify in order to flatten or mitigate risks that are outside of their control.

 

Track capital investments and operating costs

No matter how well you manage your resources, you can’t help but invest in growing your business. A CFO can teach a project manager as to when it makes sense to invest in capital assets and operating costs. Investing too early can lead to premature depreciation (where a physical asset loses its value over time), while investing too late could lead to the risk of not having the asset at the time when its needed. Just In Time (JIT) Inventory Management may be a common interest to you both.A CFO can teach you capital investments impact bottom line and how operating costs are tied to revenues.

 

Teamwork is key

While a Project Manager may be very busy and working in stressful situations, the CFO needs you to know that they are an important project stakeholder and they need to be provided with timely information. They should never have to chase you for this. To keep the CFO engaged as a loyal supporter of the project, you need to provide them with financial information at the agreed times. Work on multiple projects at once. As a Project Manager, you’ll often have several projects going on at one time. Often times, your company will assign these projects as part of your job description so that you can manage them efficiently.

 

Bottom line

A CFO can teach accounting policies to a project manager. They can broaden a project managers view of risk, highlighting different aspects of risk management than a novice project manager may be used to. You can also understand the risks associated with efficient resource management or cash flow. Finally a CFO can advise you as to when it makes sense to apply accrual or cash accounting principles, and how these principles can affect your company’s financial performance.

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