How To Ensure The Financial Approval Works?

A project starts as a simple Idea that grows to become a fully fledged and defined project with the approval to go ahead.

A crucial part of this is defining what the project will cost, how it will be funded and the approval to spend the money. This is no small part of the project start-up and is often the most challenging part. However, the objective is not to get financial approval.

The objective is to get a signed and approved document that will enable you to carry out the project. This is not the same thing.

Obtaining financial approval can be complex. The spending will probably include multiple orders to be placed with multiple vendors. The funding may be from several budget line items (including, perhaps, contingency budget) and various one-off and recurring cost savings and benefits (both hard and measurable and soft and not easily measured).

The documentation will need to be portrayed in a way that the management understand and matches the structure of the business and the benefits that are expected. This may be very different to how the vendors need the orders to be raised.

The document will be refined and refined until management are finally happy to authorise the project budget.

However, what happens if, at the end of this process, the approval document bears little relation to the original version and, crucially, the orders that need to be placed?

You’ll raise purchase orders and submit them for approval and they may get stuck because the approver can’t see a correlation between what you’re ordering and what was actually approved. Even if this isn’t a problem - there may be a problem getting invoices paid that can have a knock-on effect beyond the project itself.

From this it is very important that as the funding approval document is refined and refined that you never lose sight of the purchase orders that need to be raised. In fact, it probably makes sense to have the purchase orders detailed in the appendices.

Getting this wrong can be catastrophic for a project.

If purchase orders get stuck for this reason you can find yourself back at the project approval stage asking for funding. The delay will mean the project timescale will need to be recalculated and the correlation with other business activity taken in to account. some of the costs may also change. Resourcing costs for the project manager, at the very least, will increase.

The change to timescale and costs may mean the project will have to be completely reevaluated. For example, if it cannot be completed by the Christmas close down it will have to wait till next year - in which case will the sizing or even the choice of solution itself still be correct?

So, the final word of advice is to see the business approval document as a functional document designed to achieve certain goals throughout the project. Getting a signature on it is not enough, in itself.

You will find the video version of this article on YouTube here: Project Managers, Will Your Financial Approval Do Its Job?