Time Phased Budgeting For Cash Flow Visibility and Risk Management

Why would I need to time-phase my project budget? The challenge with any project budget that doesn’t utilize the advantages of time-phasing, is that the project manager won’t know exactly when money is anticipated to be spent on the project. And neither will the CFO. Time-phased budgeting allows project managers to allocate costs for project activities over the anticipated timeline in which those expenditures are planned to take place. Not just by using any old guess as to when things might happen – or by using some uniform, evenly distributed pattern – but by actually using real contractual agreements as to when items are planned to be paid for.  By doing this, the project manager is then armed with an accurate timeline that predicts project spend patterns. Time-phased budgeting does more than just uniting the project schedule with the project budget. Of course, uniting the two is the first step in a time-phased approach to project budgeting. Without first merging the two, budget and schedule have no interconnection, and are left to float along independently. By subsequently time-phasing a project budget, you’re then armed with extended capacity to further refine exactly when, during the anticipated schedule, certain expenditures will take place. This delivers a more accurate representation of cash outflow so that appropriate project financial planning can be undertaken. You’re also much better able to monitor budget vs. actual costs as the project progresses so as to gain clear insight into potential cost overruns (or, under-runs) and other cost controls capabilities. It may not be immediately obvious why all this matters, but to get a good reading on that, it really boils down to two things: Managing project Cash Flow Powerful