Funding Limit Reconciliation
Many organizations have limited funding for projects, which affects the project cash flow. The funding may be based on a fiscal year or a quarter. Either way, your project budget must adhere to the constraints imposed by the funding limit.
For example, suppose you have outsourced a part of a project and the vendor delivers and invoices you in the first quarter. However, the invoice and consequent payment was planned for in the second quarter. In this case, as a Project Manager, you wouldn’t have the funds to pay the vendor in the first quarter.
You will use funding limit reconciliation to avoid large variations in the expenditure of project funds. Funding Limit Reconciliation may lead to revisions in the schedule and resource allocation. Therefore, the project budget directly impacts not only the cost, but also the schedule and scope of work that will be completed.
Best Practice: Instead of committing to a budget for the entire project, commit to the budget for each release. In addition, watch out for scope creep during project execution. Otherwise, you will surely run out of funds.