term paper on project management and financing

Project Financing: Key Concepts Essay

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Project financing can be discussed as a relevant approach in order to create the value with the focus on minimizing risks and maximizing returns ( Key concept overview , 2015). When financing of large projects in the energy industry is developed and implemented appropriately, it is possible to state that project finance mechanisms work to create the value (Simkins and Simkins, 2013).

The reason is that project financing is an effective tool to address problems associated with taxation, management of risks, and arrangement or regulation of costs among other issues (Simkins and Simkins, 2013, p. 24). In spite of the fact that these factors are often discussed as affecting energy projects negatively, the analysis of principles of project financing demonstrates that it can be used as a value-creation tool even in the context of the mentioned factors (Simkins and Simkins, 2013). Thus, the project financing system allows for creating additional resources in order to address the risks and problematic areas without focusing on debt (Baker, 2015).

From this point, project financing is regarded as not only the value-creation approach but also as the “solution to a very complex contractual design problem” (Simkins and Simkins, 2013, p. 24). When risks are addressed, transactions costs are regulated, the use of imperfect information is avoided, and the capital structure is improved in the context of project financing, it is possible to speak about creating the real value (Simkins and Simkins, 2013, p. 25). Project financing allows for responding to company leaders’ and investors’ interests in terms of addressing typical threats to the financial success in the energy industry.

The impact of financing related to large-scale energy projects on such an aspect as the share price should also be discussed in detail. It is also important to examine the effect of project financing on the cash flow. When project financing is designed successfully, risks are managed, and investors’ losses are minimal, it is possible to expect positive changes in the share price. The reason is in the creation of a situation for predicting positive returns (Abdel-Khalik, 1993). The share price also changes when projects’ returns can cover expenses for addressing sponsors’ interests and expenses planned for further projects (Simkins and Simkins, 2013). Investors become involved in a series of projects, and this situation results in changes in the share price and significant revenues.

Cash flows that are associated with project financing in the energy industry can be high when investors’ returns are also high. This principle can work for the realities of the energy industry because projects are discussed in terms of their attractiveness to sponsors (Johnston and Johnston, 2006). Projects’ cash flows are predicted and analyzed in terms of possibilities for the further growth. Project financing related to the energy industry can create more conditions for attracting investors, and this situation affects cash flows (Simkins and Simkins, 2013). It is important to state that large-scale projects financing has the highest potential effects on positive changes in cash flows because of the involvement of more investors.

Reference List

Abdel-Khalik, A. (1993) ‘Discussion of financial ratios and corporate endurance: a case of the oil and gas industry’, Contemporary Accounting Research , 9(2), pp. 695-705.

Baker, L. (2015) ‘The evolving role of finance in South Africa’s renewable energy sector’, Geoforum , 64(1), pp. 146-156.

Johnston, D. and Johnston, D. (2006) Introduction to oil company financial analysis . New York: PennWell Books. Key concept overview: considerations in financing large energy projects (2015) Liverpool: Laureate Education, Inc.

Simkins, B. and Simkins, R. (eds.) (2013) Energy finance and economics: analysis and valuation, risk management, and the future of energy . Hoboken: Wiley.

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IvyPanda. (2020, August 18). Project Financing: Key Concepts. https://ivypanda.com/essays/project-financing-key-concepts/

"Project Financing: Key Concepts." IvyPanda , 18 Aug. 2020, ivypanda.com/essays/project-financing-key-concepts/.

IvyPanda . (2020) 'Project Financing: Key Concepts'. 18 August.

IvyPanda . 2020. "Project Financing: Key Concepts." August 18, 2020. https://ivypanda.com/essays/project-financing-key-concepts/.

1. IvyPanda . "Project Financing: Key Concepts." August 18, 2020. https://ivypanda.com/essays/project-financing-key-concepts/.

Bibliography

IvyPanda . "Project Financing: Key Concepts." August 18, 2020. https://ivypanda.com/essays/project-financing-key-concepts/.

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Financial management Term Paper on example of Nokia

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Microsoft will take over Nokia's Devices and Services business, which includes both Smart Devices and Mobile Devices. In other words: The Lumia, Asha and X series are now all under Microsoft's umbrella. Design teams, supply chain, accessories, employees, developer relations and most of Nokia's manufacturing plants and testing facilities are also on Microsoft's side, as are most of the company's services like MixRadio, Store and more. Here, Nokia's mapping entity, is considered a separate business and isn't included as part of the deal, but Microsoft has agreed to a 10-year licensing agreement. On the one hand, Nokia's decision to sell its mobile phone business to Microsoft is a Finnish tragedy. At Nokia's best times, this giant contributed a quarter of Finland's economic growth for past 10 years: it paid 23% of Finland's corporate taxes. On the other hand, getting out of the mobile phone business sector is a probable blessing for Nokia. Life is tough nowadays for second-tier smartphone companies. Nokia's global market share in the mobile phone market has dropped to 14 percent (from 19.9 percent a year ago, according to Gartner). The revenue of the company brings in from its devices and services division is down by more than half since 2008.This paper is aimed to show why Nokia had to be saved by someone external, both from the technological and financial point of view.

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Nokia was a synonym for the mobile phone industry for a long time; however, when it came into the era of smart phones, the former leader was under an awkward situation. Nokia sold its mobile phone business to Microsoft on September 3, 2013. A company following Kodak with the legendary color failed in the impact of the new technology revolution. This was a typical case of the subversion of an industry; therefore, the author believed that it was necessary to analyze the process. This paper studied Nokia's decline mainly from the three parts. First of all, looking back Nokia's development process from the glory to the decline, it can be divided into three stages: the transition period, the peak period and the decline period, followed by analyzing the reasons of its decline from three parts: Nokia executives' grasp for the market, the company's business strategy and business cooperation, and finally analyzing its inspiration for modern enterprises from the marketing perspective.

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Project Financial Management: Managing Project Financials

Whether you call it project financial management or project accounting, managing a project’s finances is essential to delivering a successful project. It’s more than just keeping up with costs. There’s a lot of planning, managing and tracking involved.

But what exactly is financial project management? We’ll get to that and define the various project financials before getting into the process of managing a project’s finances. Then, to help you get started, we’ll have a few free financial management templates you can download.

What Is Project Financial Management?

Project financial management is the process of controlling the financial aspect of a project, such as its cost, revenue and profit. To do this requires planning, estimating, budgeting, funding, managing project expenses and billing.

The budgeting part of project financial management is by far the most important aspect of this process. Being able to effectively manage the budget over the life cycle of the project and making sure that all the planned tasks are completed without having to overspend is critical to the successful delivery of the project.

The importance of project financial management cannot be underestimated. It will help manage the overall project better and positively impact business growth. That’s because it balances the investment in the project with the expected return on that investment.

Other benefits include helping track progress with financial metrics, identifying and prioritizing projects that have a higher return on investment and managing project scope and cost overruns. It can also be helpful with improving resource management capabilities by better allocating resources based on your business’s strategic goals.

Naturally, project management software facilitates these benefits. ProjectManager is award-winning project management software that can track costs in real time to help you with project financial management. Our real-time dashboards give project managers a high-level overview of project costs whenever they want them. Dashboards have easy-to-read graphs and charts that track five other project metrics, too. Plus, there’s no time-consuming setup required as with lightweight alternatives. Get started with ProjectManager today for free.

What Are Project Financials?

Project financials are the money related to the project you’re managing. By planning, managing and tracking project finances, project managers can help deliver a profitable project. Project financials center around controlling the following.

Project Costs

Project costs refer to the total funds that a project requires. This includes direct costs, such as fixed labor, materials and equipment, as well as indirect costs that include utilities and quality control , among other things.

Project Revenue

Project revenue is what a project is expected to earn. It’s estimated by looking at historical data, such as past performance and using that information to predict future performance. It can be represented by target revenue, which is what the project is expected to earn and actual billing, what you bill your customer. It can also include the estimate at the completion of project billing, which is actual billing and the remaining labor billing which is planned billable expenses plus flat fees for all unfinished activities.

Project Profit

Project profit is the total amount of money that the project earns after expenses. Net profit for a project is the gross profit minus operating expenses and taxes.

Project Funding Sources

Project funding sources can come from many different sources. For example, debt is when those funds are raised from lenders. Companies can also issue bonds and sell them for funding. Equity financing is when a developer raises private equity funds. They can also get loans to finance the project.

Project Cash Flows

Project cash flows refer to cash moving in and out of an organization and determine the project’s rate of return or value. This money can be used to fund the project.

How to Manage Project Financials

Whether you’re working on a large, expensive project or a smaller one, managing project finances is essential to delivering that project on time and within budget. Following these 11 steps will help you better manage your project financials.

1. Clearly Define the Scope of Your Project

Before you can zero in on the costs, you need to understand the scope of the project. That includes the project goals, deliverables, tasks, and, of course, costs. Create a scope statement to ensure that you cover all the bases, such as the project schedule, and align the project with stakeholder’s expectations.

2. Identify Project Risks

All projects are risky endeavors. Unexpected events can have a positive or negative impact on the project. Therefore, one must plan for risks by identifying what might happen and then create a plan of action if it does. It also helps to prioritize their risks, note the likelihood of them happening, and, if they do, their severity.

3. Do a Feasibility Study

A feasibility study is used to evaluate the project and determine if it’ll be successful and, therefore, worth initiating. Before you can manage finances you need to see if the project itself is worth the investment. The feasibility study will help you identify potential issues and allow for a better evaluation of the project’s viability.

4. Create a Resource Plan

If the project is feasible, then you’ll want to create a resource plan. Resources are anything you need to execute the project, from people to equipment and materials. In other words, everything that costs money in a project. Therefore, you must determine what those resources are and when they’re needed to allocate them accordingly based on your team’s capacity.

You can use our resource planning template to estimate all the resources that are needed to execute your project, their costs and the date when they’re needed, which is critical for estimating your project costs and making a budget.

5. Estimate the Cost of Project Resources

Not only must you make a resource plan, but estimate the cost of those resources. They will be the bulk of the expenses for the project. Use historical data, expert advice and anything else you can to create the most accurate estimate for the project resources as they will be a large part of the overall project budget.

6. Conduct a Cost-Benefit Analysis

Another tool to figure out if the project is worth the time and money is running a cost-benefit analysis. This tool helps to evaluate the costs of the project against the benefits, which can be financial or otherwise. This practical, data-driven approach will help make investment decisions that are more likely to get a return.

7. Estimate the Return on Investment of Your Project

Speaking of a return on investment, that’s another metric by which to measure the potential project before starting it. In other words, you’re going to evaluate the project from a solely financial perspective to see what its profitability will be.

8. Know The Break-Even Point of Your Project

The break-even point in a project is when the total cost and the total revenue are equal. This is helpful when making a financial decision about a project especially if you’re launching a new product as it predicts how many units must be sold, which helps determine if the project meets market demand.

9. Make a Project Budget

Now you’re ready to make a budget. This should be the most accurate estimate for your project’s costs. You’ve already defined the project’s scope, now you want to use a work breakdown structure to identify all deliverables and the tasks necessary to complete them. You’ll also use the research in making the resource plan, set aside a contingency fund to cover unexpected expenses and then create the budget.

10. Secure Funding

This budget will be used to help secure funding for the project. This means coming up with a proposal that outlines your objectives, methodology and the expected outcomes for the project. It should sway potential stakeholders to fund the project because it’ll give them a return on their investment.

11. Track Cost Variance as the Project Is Executed

To ensure that the stakeholders who fund the project get that return on their investment, you’ll need to track cost variance. This means, comparing the actual costs of executing the project against what you planned for in the budget. This allows project managers to see if they’re spending as planned and, if not, adjust the schedule or scope to get back on track.

More Project Financial Management Templates

Project management templates can help you manage project finances. ProjectManager’s website is an online hub for all things project management, including free project management templates for Excel and Word. We have free templates to help you with every phase of a project. Here are a few that can assist your project’s financial management.

Project Timesheet Template

This free project timesheet template allows you to keep track of the work hours your team members have spent on project tasks, their pay rate and their corresponding payment.

Project Estimate Template

Having accurate estimates is part of project financial management. Use our free project estimate template for Excel to help you create and keep to your budget. Our free template allows you to attach labor and materials costs to every task in your project.

How ProjectManager Helps Manage Project Finances

While our free templates can help you get started with your project financial management process, you’re going to need project management software to be able to track those costs as you execute the project. ProjectManager is award-winning project management software that is online so the data you get is in real time, which gives you the advantage of catching discrepancies in your actual costs compared to your planned costs quickly so you can respond quickly and get back on track. But that’s only one small part of how our tool helps you manage finances.

Monitor Labor Costs With Timesheets

Labor costs are often your most expensive. If your labor resources aren’t executing their tasks according to the project schedule, you’ll be racking up extra costs in no time. Being able to keep track of your labor costs is essential to staying on budget. Our secure timesheets streamline the payroll process but also give project managers a window into the team’s work. You can see what percentage of their tasks have been completed and if that aligns with where they should be in terms of the larger project plan.

Use Reports to Get More Detailed Information

While project managers can get a high-level overview of their project’s finances with the real-time dashboard, when they want more details they can toggle over to the reporting features. There they can easily general status reports or portfolio reports if they’re managing multiple projects. They can also general reports on timesheets to track labor costs, project variance and much more. All reports are customizable, which means they can be filtered to show only the data you want to see. Then they can be shared in various formats with stakeholders to keep them updated.

Delivering your project to a successful completion takes more than financial management. That’s why our software has risk management, task management and resource management features to ensure you have the control over your project that you need to bring it in on time and within budget.

ProjectManager is online project management software that connects teams no matter where they are, in the office, out in the field or anywhere in between. Share files, comment at the task level and more to foster better collaboration. Join teams from Avis, Nestle and Siemens who use our software to deliver successful projects. Get started with ProjectManager today for free.

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