Scope Planning and Analysis for Effective Financial Management

Keep Your Finance and Accounting Projects in Order and On Track

Every aspect of a project is tied to the budget. The amount and type of labor, number of work hours, and required level of effort all contribute to overall costs. Scope planning is critical for avoiding surprises that can delay projects, incur additional costs, and lead to poor customer experiences.

How can your organization properly conduct scope planning and how can it help control the financial aspects of your organization?

What is Scope Planning and How Does it Work?

Scope planning involves organizing and allocating all aspects of the work required for a project to be completed. The scope is crucial because it helps guide project managers, directors, and supervisors to understand what is and is not part of the project’s scope.

When you conduct scope planning before a project, it becomes easier to identify any work that falls outside the scope, thus potentially incurring additional costs. In short, scope planning helps your organization stay within budget and know when to adjust for extra work.

Scope planning must take place before the project begins, and the scope must be managed throughout the project’s duration.

Scope planning and management include three main processes:

1. Planning: Mapping out the work required for the project, including the team members involved, level of effort for each deliverable, and the project’s duration.
2. Controlling: Monitoring the project scope closely as the project progresses to watch for scope creep (explained below) and ensure deliverables occur on time and within the agreed-upon level of effort.
3. Closing: Essential for client satisfaction and internal tracking, auditing the scope following the project to ensure it aligns with the original plan and budget, and accounts for any changes.

Project scope management is inherently linked to financial management. Companies must understand the costs of completing a project to ensure appropriate billing to the client or customer.

Let’s examine each of the core processes of scope management to understand their importance for project execution and how they impact financial management.

Scope Planning: Defining the Work That Needs to be Done–and the Budget Required

There are five key steps involved in creating a project scope:

1. Understanding the specific needs of the project, such as the required timeline, necessary personnel and resources, and milestones.
2. Establishing the project’s objectives. Is it intended to generate more business? Launch a new product? Fulfill a large order? Often, projects have more than one objective, and each should be considered to understand the full scope of what’s required.
3. Sub-dividing the project deliverables and work into smaller, manageable components, creating a workflow where relevant team members are assigned to each task, and the tasks culminate in the final project.
4. Defining the financial scope of the project, taking into account the determinations made during steps 1 through 3. Each of these elements should allow you to define a specific budget to assign to the scope.
5. Making adjustments to the budget based on any known limitations or gaps in the project plan, such as potential supply chain issues, technology requirements, or possible overages on estimated timelines.

Of course, not all project scopes will be completely predictive. Agile project management approaches allow for projects to adapt and change over their lifecycle, and the project scope is defined and approved at the beginning of each new phase.

Agile methodologies work well for projects that are expected to change frequently and include close and regular involvement with key stakeholders. In an agile project scenario, the five steps listed above would be repeated at the onset of each new project phase.

Regardless of the project management methodology, there are a few things you’ll want to watch out for when putting together a project scope. Like any other business document, the clearer it is, the better. The project scope needs to be interpreted by all involved parties and needs to be easy to reference if needed to demonstrate what is included in the scope and what is not.

Avoid the following issues when putting together the project scope during your scope planning process:

• Incomplete or unclear definitions: All aspects of the project must be clearly defined, from the timeline to the individual deliverables. Failing to specify what constitutes a “piece of collateral” or “website performance analysis” can result in cost overruns and lengthier timelines.
• Ambiguous language: There’s a big difference between “several rounds” and “3 rounds”. If you want to avoid tasks taking longer than intended or doing work that feels above and beyond what should be required, be specific in the project scope rather than vague or ambiguous.
• Lack of finality: Before the project can begin, the scope needs to be finalized; signed off on by all involved parties, and held in its original form for the duration of the project. Failing to finalize the scope with signatures and allowing the scope to be altered during the project can lead to changes to parts of the scope after the project has begun, which is a primary cause of scope creep, missed deadlines, and “never-ending” projects.
• Lack of collaboration: If all stakeholders are not involved in some aspect of scope planning, it can cause major delays if individuals take issue with aspects of the project after it has begun. As the scope is defined, ensure everyone involved is aware and on board to avoid surprises that can send a project way off its timeline and budget.

Scope Controlling: Monitoring and Analyzing the Scope Throughout the Project

Many challenges can adversely impact a project by throwing off the timeline or budget. That’s why it’s important not just for your project scope to lay the groundwork for the project, but for your team to closely monitor and analyze the scope throughout the project.

Effective scope control should involve running a variance analysis against the project’s budget and schedule. If a variance appears—i.e., the budget is coming in higher than originally planned—this early identification allows you to address it quickly to keep the project on time and on budget.

And variances can happen quite frequently. Clients might ask for one extra item here or provide more rounds of feedback there, and pretty soon your team has put in 20 extra hours on additional work not included in the project scope. This is called scope creep, and it happens all the time.

Scope creep can be avoided if someone is paying close attention to the activity happening on the project and how it ties back to the project scope. If the scope only accounts for two rounds of edits but your client is onto the third round, it’s time to step in and reference the project scope.

Keeping a close eye on the project scope helps project managers and directors manage client and stakeholder expectations and ensures there are no surprises with deadlines or, more importantly, the budget. Scope planning can also insure against other common issues that might arise during a project, especially when working with a client. These can include:

• Rethinking requirements in the middle of the project
• Constantly changing requirements
• Delays in client communications that increase the project timeline
• The final project deliverable is not what the client was expecting
• The project exceeded the budget

All of these challenges can be dealt with and alleviated if your project scope is monitored and analyzed properly.

However, additional stakeholder requests or timeline delays due to supply issues or unforeseen circumstances will happen, and while it may be out of scope or result in a change to the scope doesn’t mean it can’t be done.

Change requests are an important way to keep track of alterations to the scope. Change requests are essentially a log of the specific request, the circumstances around the request; i.e., the client needs a few extra days to review, the stakeholder making the request, and how the request will impact budget, schedule, and other dependent tasks.

Closing the Scope: Auditing the Scope for Project and Financial Accuracy

This step is perhaps the most impactful when it comes to financial management. As we know, every aspect of a project is connected to a budget line item. Your scope, when planned and controlled properly, manages the definition and execution of those line items, from labor to the number of hours of work to the level of effort.

There are several reasons why the scope closing is so important:

• Your project might not be done. It’s not ideal, but the customer may not sign off on the project if the final deliverables aren’t what they expected. At this point, you’d be required to do some rework or regroup your project team—all of which incur additional costs.
• You need to conduct a final analysis. Given the number of things that can go awry if your scope is not planned correctly or followed properly during the project, the scope closing is when you get a detailed look at what those things were and how it impacted the overall project. The features of your project should map exactly to the project scope, and if they don’t, you should be able to understand why.
• It’s time for the post-mortem. Was there scope creep? How could it have been avoided? Were change requests being correctly utilized? Was the client dissatisfied at any stage? Take what you learned from the project and apply it to the next one.

The Bottom Line: Customer Experience

Even the most well-executed and well-managed project scopes can come up against tricky project challenges. But understanding how to tackle those challenges and keep your projects within scope means you’re providing better customer experiences overall.

The same goes for internal projects. Perhaps you’re implementing a new ERP system, which can be a significant undertaking. Creating a project scope helps your organization:

• Define the business needs and challenges the ERP system needs to address
• Understand the specific functions the ERP system needs to provide and any systems with which it needs to integrate
• Establish deliverables and assign teams to own them at different stages; i.e., creating an implementation team responsible for onboarding the system
• Validate the project scope with your finance management team at the beginning and throughout the implementation
• Identify any challenges or delays that would cause the implementation to run over budget or the timeline and manage them accordingly

It’s just as helpful for a client as it is for you to have a project scope that is clear, collaborative, and detailed, and the investment in the project is all the more valuable and meaningful when things go as planned.

Budget touches everything, and everything touches budget. A well-defined project scope can guide projects and ensure seamless finance and accounting operations or the implementation of customer-centric cloud applications.

Schedule a demo today and learn more about gaining customer-centricity on a single platform, which runs on the Salesforce cloud, and see how it can streamline your operations and put your customers at the center of everything you do.