Project Financials - Why and How

What are Project Financials and Why We Need Them? 

• Importance of Tracking Financial Savings:

  • Only about 50% of companies track their savings from continuous improvement projects, which is critical for demonstrating their value and ensuring their continuation.

  • Financial savings from a project must be reported accurately as a measure of success for both the project and the supported business areas.

• Measuring Success in Lean Six Sigma Projects:

  • Understanding success metrics in Lean Six Sigma projects involves reducing costs, increasing revenue, saving time, and improving customer and employee satisfaction.
  • Success can be measured by evaluating cost reduction, revenue increase, time efficiency, safety improvements, and overall enhancement of work life for the team.
  • Lean and Six Sigma primarily target cost reduction by improving efficiency in three categories: materials, labor, and safety.
  • However, projects can also generate hard savings from increased revenue.

• Role of Financial Savings in Project Prioritization:

  • Accuracy in reporting serves as a decision-making tool to assess whether a project should be continued based on expected savings.
  • Financial savings act as a tool for prioritizing projects within a business, helping determine which projects should receive top priority or reduced priority based on their expected savings.
  • Financial savings ultimately tie back to ROI, emphasizing the importance of understanding the costs and returns associated with a project.
  • Successful projects may have intangible savings, making it crucial to estimate ROI early in the project to assess its viability.

• Credibility and Consistency in Financial Savings Reporting:

  • Consistent reporting of financial savings enhances credibility, serving as a common language for communication across different departments.
  • Financial savings should be reported consistently to build credibility over time and facilitate effective communication of project contributions.

How to Calculate and Track Project Financials?

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