Project finances are important to accurately forecast to successfully control project management budgets. Forecasts are the basis of all project planning, quantitative or qualitative, and use sophisticated or simple statistical models or algorithms. Forecasts are crucial for determining large capital investment projects’ economic viability and project finance ability because they are used in critical decision-making. Using project forecasting, you can make useful predictions about when and how your projects will develop. As a result, you can make adjustments to improve project outcomes.
For both qualitative and quantitative forecasting methods, having visibility and control over accurate, up-to-date project finance data is key to the success of the project.
What are project management finance forecasting techniques?
1. Qualitative methods:
When qualitative information is more widely available than quantitative information, including specific dates, costs, and hours, you can use techniques for qualitative forecasting early in the project life cycle. Qualitative forecasting methods use data such as feedback from onsite managers to predict potential project outcomes.
In some qualitative methods, experts are interviewed one-on-one and given a chance to give their own distinct, unbiased opinions. You could also ask experts to work together, which could foster communication and help the team reach a consensus. Forecasters can compare these opinions to figure out which outcome is most popular.
2. Quantitative methods:
Whereas qualitative forecasting is based on opinion and expertise, quantitative forecasting is based on actual numbers, such as dates, costs, and hours.
Because larger data sets that span a longer period lead to more accurate predictions, historical data is very important for time series analysis and projection techniques. Quantifiable data and patterns are used in this group of techniques to predict the project’s future. Some techniques in this category include:
- Trend analysis:
It is frequently used to predict a project’s profitability and cost. This method, which can also be referred to as trend forecasting, trend projections, or straight-line forecasting, uses historical data to generate a predicted spending trajectory that will continue until the project’s completion.
- Cost-benefit analysis
This also makes it simple for the project manager to compare the advantages of different projects, which may help them choose which ones to focus on. This tool allows forecasters to compare a project’s costs and benefits.
- Break-even analysis
Because of this, break-even analysis can be used to boost investor and project team confidence. For a project to surpass its initial cost and become profitable, this forecasting method predicts its total cost to estimate how much money it will generate.
3. Casual models
These methods enable the inclusion of one-time occurrences and other unusual occurrences. They can accurately predict specific turning points or long-term outcomes by compensating for specific social or economic variables. For instance, the regression model uses a mathematical solution to effectively predict budgeting by comparing sales to other economic influencers. Casual models make complex project predictions by combining broad historical trends with highly specific information and relationship data.
What are the tips for forecasting project finances accurately?
- Establish Clear Goals and Objectives
Before you embark on forecasting project finances, it’s important to establish clear goals and objectives. What key aspects do you need to include in the cost, timeline, and scope? Ensure that these goals and objectives are clearly outlined to forecast accurate results. Additionally, set specific financial goals that will enable you to make decisions regarding budgeting, pricing, and other financial components. Using a work breakdown structure that divides project objectives into a hierarchy of tasks and deliverables can be exceptionally effective.
- Evaluate Available Data Sources
Evaluating available data sources can help you make accurate projections on your project finances. Analyse current and previous financial records, as well as other external sources of information that are available. Primary data sources should include the organisation’s internal financial statements, such as balance sheets and profit-and-loss statements, while secondary sources might include industry reports or other external datasets. Cross-referencing different data sets gives you an even more detailed view of your economic forecast.
- Analyse Defined Variables
Once you have compiled the relevant data sources, you can start to analyse the defined variables for your budget. This includes gathering estimating metrics such as labour costs, material and supply prices, and other related expenses. This allows you to assess how much you need to commit to each project aspect depending on its projected timeline or completion date. Use this information to support your overall financial projections to ensure all parties involved are on the same page.
- Develop a Forecasting Model
Now that you’ve collected all your data, it’s time to create a forecasting model. This will enable you to accurately forecast project budgets in different scenarios, such as timelines and costs. There are several models available, and each has its unique features. Consider the strengths and weaknesses of different models depending on the complexity of your project and financial goals. To develop an accurate forecast, make sure to take into account any external factors which could impact forecasting project finances.
- Use software for project forecasting
Companies and individuals can use various software and artificial intelligence tools or Project finance dashboards designed to aid project forecasting. To establish or enhance accurate forecasting, you might want to look into the best forecasting project finance software and put it to use. Additionally, this step may reduce the time team members must devote to forecasting efforts.
How can efficient project management solutions help forecast project finances accurately?
As you can see, planning and controlling your project rely heavily on the budget. Project budgets can be created manually, but if you’re working on a large project with many milestones and dependencies, you’ll be more precise if you use budgeting features in project management software.
Project management systems like Proteus would accurately forecast the project budgets and calculate your budget based on the scoped-out project. It will make project plans and proposals, turn them into working projects quickly and easily, manage people, resources, and time, and keep track of all finances. The scope also considers the roles you’ll need to play and how long you’ve worked on previous projects.
The platform ensures you will have a more precise project scope and budget. You will get a visual budget with a quick overview of revenue, cost, and profit from Proteus’ low-cost project management solution plan. You will also be able to see how time entries and invoices affect the budget and determine whether you are on track.
About Proteus Project Software
Xergy Group’s Proteus project management software is designed to work with your existing systems and to scale and evolve as your business grows. Created by project management leaders, for the diversified engineering consultancy sector, Proteus delivers an end-to-end work management software platform with detailed workflows from the early opportunity stage through to project delivery.
Proteus’ end-to-end project management software is a cloud-based system designed for businesses of all sizes to handle projects of unlimited complexity and is compliant with common project management frameworks and ISO standards. Each feature is aimed at making bottom-line improvements by improving utilisation, streamlining workflows, providing quick and efficient access to resources, and reducing overheads. Check out some of our client case studies to learn more about how Proteus makes a tangible difference.
How to get Proteus
We recommend getting setup on a free trial. Proteus operates under a software-as-a-service (SaaS) model. We offer flexible tiers and bespoke development services. The Standard tier starts at $40 per user per month and Pro is $55 per user per month. Billing is monthly or annually and we offer Enterprise packages for larger clients. For more information on our pricing visit our pricing page or get in touch with one of the team.
We designed Proteus to be simple, and that means you can get up and running on Proteus without an IT team or support from a programmer. You will want to spend a bit of time configuring the admin console so that you have everything set up to suit your company structure, but it’s very intuitive and you don’t need a PhD in IT. However, we want you to get the best out of what is a brilliantly powerful tool, so don’t hesitate to ask for our support. We have a team of product experts who are ready to help you with the configuration process, so get in touch today by filling out the form below: