Project Leadership - Step by Step - Tutorsindia

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Project Leadership – Step by Step – Part IStepstone # 8: Agreements and Obligations in SMPs8.3 Conclusions about Stepstone # 8Stepstone # 8 is recommended for assisting with the creation of a “project charter” to help ensure that theproject has a satisfactory budget and agreements. A total score of 40 is a pretty good confirmation that theproject can be carried out. Here too, it is important to know which queastions have received a negativeresponse, although the 80% requirement is good enough in principle. But if no form of contract or agreementexists, we should conduct a closer investigation as to the reason why. A half promise from some SMPsupporters can create a false sense of security. To continue working further with a project without any clearcommitment from the client, customer, sponsor or superior management can eventually end in greatfrustration for all of the project’s participants.This applies directly to the motivation as well, which in a short time can change from a high motivation to adestructive demotivation. Important obligations should therefore be communicated to all of the project's CoreTeam members so they know what they are dealing with.In conclusion:A high motivation on this Stepstone presupposes clear agreements on external resource commitments.Good communication results from important agreements being known to all the project’s Core Teammembers.8.4 Stepstone # 8 Used on the Conference SMPThe simplest way to budget our SMP will be to base it on the Milestone Plan.Within their AoR, all stakeholders shall make an estimate of how much the work will cost to reach eachmilestone in their Result Path without exceeding their budgetary framework and also when direct payment issupposed to occur. This is a cost estimate designed as a liquidity budget. The reason for this in a SMP is thatit is very important to keep track of when pay-offs will take place in relation to grants or income.When the conference premises are decided, it is assumed that “physicals” will cost a total of approximately3,300 Euros. Out of this, 800 Euros is for renting the facilities, and the rest is for catering. It is furtherassumed that only 200 Euros will be prepaid upon ordering the conference facilities, and the remaining 3,100Euros will be paid after the premises is used and the food consumed. Similarly, lags in payment are assumedto apply to the other areas of responsibility as well. 98This setup for SMPs will often be different from budgeting for larger projects, in which the detailed splitting ofpayment schedules is unnecessary since order and payment come quite close to each other in the overallperspective. The reason for this is that weekly or even monthly payment displacements mean little in terms ofthe overall accounting and follow-up procedures in SMPs. For large projects, this is normally recorded at thepoint of order. An exception to this is for signed commitments, which will be discussed later.For SMPs, it is important that payments are recorded when they are made. This makes the follow-up easier90Download free ebooks at bookboon.com
Project Leadership – Step by Step – Part IStepstone # 8: Agreements and Obligations in SMPsand also ensures that the project leader manages the project’s current cash flow intelligently. Cash flow isvital to a business, and anyone looking to lend, invest or extend credit will wish to see that the business orproject is able to master its outgoings sufficiently. Even when we know from the start what grants we willhave in a SMP, the project leader must check how much money is spent at milestones or other points intime. If, however, grants come in portions, it is very important that the project leader follows up the liquiddevelopment and not just the costs development of the SMP. An accurate cash flow will enable the projectleader to predict financing needs, thereby allowing the establishment of facilities in advance rather thanafterwards. Producing a cash flow forecast will demonstrate that we have thought through both the bills andother types of outgoings. Stakeholders can challenge our assumptions, but responding with good answerswill produce confidence that our SMP forecasts are robust.The result of all this can be a liquidity development for our conference SMP as shown in Figure 8.1:Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9Areas ofResponsibilityPhysicalsSumsRegistrationsThe conferenceMarketing200 600 2,500 3,300500 300 1,000 1,8001,500 2,000 3,500500 700 200 1,300Sums per period 0 200 500 500 700 2,400 3,500 2,000 200 10,000Accumulated 0 200 700 1,200 1,900 4,300 7,800 9,800 10,000 10,000Figure 8.1 – The liquidity budget with cash flow figures (sums per period) for the conference SMP in Euros.As shown, the total sum of the costs is assumed to be 10,000 Euros, which is well within the financial TOR ofour SMP of 12,000 Euros. Our budget is fully acceptable because it also gives us a degree of freedom of2,000 Euros, or approximately 16% for “unexpected” costs.A simple overview of the payment profile for our conference SMP can now be made for the cumulative costsof the project. The cumulative costs per time interval are based on our Milestone Plan and are shown in theaxis chart in Figure 8.2.91Download free ebooks at bookboon.com
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