Financial Management Primer for New Project Managers

Abstract

The basics of financial management for new project managers are introduced. As a primer, managers can familiarize themselves with common accounting methods and systems, various accounting reports and financial documents, and financial ratios used to measure project and firm-wide financial performances. Proper financial management requires a reporting system that supplies both cash and accrual methods of accounting. The general ledger and the charts of accounts are the heart of the general accounting system, where the latter is the starting point in establishing the firm's accounting system. Project accounting system and cost accounting technique are also explained. Using financial data generated from the accounting information system, the balance sheet and income statement are prepared as primary documents to ascertain financial health of the firm. Financial ratios utilize the information provided by these documents. Four key ratios are discussed. These basic ratios are important indicators of performance when compared against previous measures or typical industry ratios. Both accounting and financial management are vital activities in charting the course of success of a project or firm.