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Date Posted: 09:36:35 01/08/04 Thu
Author: 何焯華條賓周+歡迎炸佢: jameslam@hkpro.com.hk
Subject: 淨屌何焯華條仆街呢+歡迎炸佢: nancychow@hkpro.com.hk

The implementation of financial management techniques by the project manager is essential for project success. Discuss.

Financial management aims to ensuring that resources are used to the best advantage. With the alternating high costs and acute shortage of funds, the majority of promoters of building work are insisting on projects being designed and executed to give maximum value for money. Thus, in my opinion, I believe that efficient financial management techniques should be carried out in order to forecast and control the cost in a well manner. Before going further, it is wise to define the scope of “financial management”. Usually, financial management is used interchangeably with the term “financial control”. Financial management constitutes the activities equate with actual and predicted financial monitoring, establishing budgets and financial plans, cost planning exercises, financial progress reports and cost reduction programmes. Financial management techniques are applied into all phases of construction process, that is the phases of feasibility, design, construction, commissioning, use, refurbishment and demolition. However, in my opinion, cost control should be given an emphasis by project manager when implementing the financial management.

Understanding the essence of financial management, it is now time to reveal the reasons why the implementation of financial management techniques is essential in a project.

The first reason is that there is always a need for financial management on project. It is vital to operate an effective financial control procedure during the design stage of a project to keep the total cost of the scheme within the building client’s budget. Pressures from some main sources have combined to stress the importance of effective controlling building costs at the design stage. Examples of the pressures are “there is greater urgency for the completion of projects, to reduce the amount of unproductive capital or borrowed money’ and ‘the move towards reduced waste and greater use of scarce resources creates the need for more accurate forecasting and improved cost control’.

Secondly, financial control can give the building client good value for money – a building which is soundly constructed, of satisfactory quality and appearance and well suited to perform the functions for which it is required, combined with economical construction and layout, low future maintenance and operating costs, and completed on schedule as lost time is money, and in accordance with the agreed brief.

Thirdly, financial control can achieve a balance and logical distribution of the available funds between the various parts of the building. Thus, the sums allocated to cladding, insulation, finishings, services and other elements of the building will be properly related to the class of building and to each other.

Finally, financial control is required to keep total expenditure within the amount agreed by the client, frequently based on an approximate estimate cost prepared by the quantity surveyor in the early stages of the design process. There is a need for strict cost discipline throughout all stages of design and execution to ensure that the initial estimate, tender figure and final account sum are all closely related. This entails a satisfactory frame of cost reference (estimate and cost plan), ample cost checks and the means of applying remedial action where necessary. (cost reconciliation)

In accordance with the given reasons and statement, it is clear that the implementation of the financial management techniques provided by project manager is essential to complete the project within budget without wasting any resources. With the growing complexity of construction projects, it is always vital to plan well in the future, especially dealing with financial matters. Financial control should be exercised as early as possible to smoothen the project process because the opportunities for making adjustments reduce substantially as the project progresses from the feasibility stage through to the maintenance period.

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