Free Custom «Initial Financial Analysis» Essay Paper

It is becoming increasingly difficult to ignore the fact that any project should be appropriately scoped in terms of its objectives, deliverables, deadlines, and costs. For sure, financial perspective is important; therefore, any project presupposes an initial financial analysis. It is especially essential for the IT projects as long as the value of their deliverables cannot be measured. Furthermore, the importance of this aspect arises in spheres, which have recently adopted information technologies as an indispensable element of their daily operations. One of such spheres is the market of a tertiary education. Regarding that fact, the following initial financial analysis is conducted for the IT project in the School of Graduates Office, which requires a database for managing all students’ profiles and studying the data. Thus, the project is financially feasible but requires certain accuracy with a proper allocation of costs.

General Feasibility

In order to speak about general feasibility of the initiated project, its investment horizon should be identified (Soriano, 2011). Usually, information technology projects are limited to terms of the project implementation as deliverables of such project produce an instant effect. In such a manner, the cost should be planned within a period of information technology’s implementation and maintenance. Investing in such terms is feasible for the School of Graduate Office. Moreover, the project will deploy a modified waterfall methodology of the IT project implementation; thus, expenditures will be allocated according to the project stages, as well as specific deliverables expected from it (Soriano, 2011). The installation of an information system with the use of SQL and PHP, however, may require substantial costs. However, the request of the School of Graduate Office presupposes that the organization possesses sufficient funds for the outsourcing implementation of its IT facility. It is a common trend in the market of tertiary education and national educational systems as a whole; therefore, the project is an adequate and feasible response.

The design and installation of a database itself are common practices and do not require large investments. Nevertheless, the office is not equipped with appropriate hardware and software, so that the facilitation of the organization is needed in that regard. Provided that the application will be used by people, who do not specialize in computer technologies, optimization of the user interface may be also required (Soriano, 2011). This aspect may be not sufficiently feasible for the School of Graduate Office, so that the project is supposed not to overrun the budget allocated to the project. In addition, the maintenance and support of the already incorporated system will imply instant support and maintenance. These costs, however, can be spent on a long run, after the primary deliverables are implemented and satisfy the customer. It is becoming increasingly apparent that the project is not limited in terms but in costs (Soriano, 2011). Therefore, the project team has more chances to scope and allocate associated costs appropriately. A general feasibility of the project is confirmed and can be described as moderate, but the project team is expected to apply cost-effective strategies for preventing the project from the cost overrun. Costs are the main financial barrier in this project since the value of deliverables cannot be measured: their presence will become apparent as soon as the technology is installed.

Associated Costs

As it has been already discussed, the project cannot overrun the costs assigned to the project budget. First of all, it is not possible because of the limited financial capacity of the project’s employer. Second, the requirements for the project have been clearly outlined, so that the project team can act with the maximal precision. However, the initial financial analysis suggests that outlining associated costs is still necessary. In such a way, the project will include expenditures on general and specific models of the information system (Schwalbe, 2014). Coding, installation, and prototyping are involved in this procedure. This aspect is the most valuable one as long as a relevant design of the information system’s model is a key factor for the achievement of the project’s deliverables with a high degree of accountability (Schwalbe, 2014). Again, as it has been mentioned before, the facilitation of user software and interface also requires sufficient investments; thus, costs spent on this aspect should be also considered.

Since the School of Graduate Office needs a unified database, hiring or construction of a data warehouse facility is explicit for the project. These expenditures should be discussed separately with the project’s employer because a choice of the location, material, and equipment will determine costs spent on the establishment of a physical component of the information system. The allocation of these costs can be also discussed within the terms of contractual agreement (Schwalbe, 2014). In the same vein, the provision of the project’s team with wages and rewards is also essential. The requirement for these expenditures may seem quite obvious, but human resources are the central decision-maker and executive of this project, and funds allocated to salary and bonuses occupies the major segment of the project’s future budget (Schwalbe, 2014). The performance of the personnel will be measured and evaluated, so that the quality of the project deliverables reaches the expected results. Hence, human resources should be not economized on even though the project is limited in budget. Eventually, the security and technical support are also imported, but associated expenditures are not fixed. It can be justified with the evidence that information systems need maintenance and support along their entire life-cycle. Therefore, the establishment of security can be assigned to the primary project deliverables; meanwhile, technical support and maintenance may be not included in the project’s budget.

Cost Reduction

Taking associated costs into consideration, the initial financial analysis assumes that the appliance of cost-effective techniques of the IT project implementation is necessary. Besides the modified waterfall methodology, the project is recommended to develop a contingency plan, which will measure and leverage costs. It has to be a break-even point of a bottom margin, which designates the amount of costs consistent with the project’s budget. All expenditures, which exceed this point, should be reduced. This strategy will preserve the project from the overrun of costs. Since the project uses the modified waterfall methodology, it is appropriate to incorporate a work breakdown structure in order to correlate the achievement of the project’s deliverables with stages of its implementation. In spite of the fact that the project team is deprived of some operational flexibility, it is the most accurate approach to spending costs. It is also reasonable to use a control account, which will assign codes to each aspect of the project, so that accounting traces all expenditures of the project as separate assets. Likewise, the project will need control thresholds, which are related to the performance of the project team, quality of deliverables, and overall effectiveness of the project. Generally speaking, the project is supposed to meet a distinct standard, so that expenditures spent on meeting the requirement are more precise. This cost-reduction method includes the quality control and assurance, training, and consulting. The main purpose of control thresholds is to adjust costs to expected outcomes instead of rendering general advantages.

Apart from the direct cost reduction policies, the project will have to consider a proper reporting format. This aspect is implied with any project, but in the case of limited funds, the initial financial analysis places the emphasis on the fact that reporting format should be followed. Meanwhile, the reporting procedure should be performed on a day-to-day basis according to the project’s terms. It can be explained with the fact that the daily reporting includes a statement concerning expenditures, so that the project is able to trace its costs with precision. In order to complete all these tasks, the project leader has to outline the instructions for daily project tasks clearly. Otherwise, irrelevant performance may result in redundant deliverables and unallocated costs. One may argue that these procedures do not have a direct relation to the financial analysis of the project, but it is certainly not true because the identification and allocation of costs are the main activities that precede the formation of a preliminary budget.

Budget

Since the time frame for the project is determined by the project team, no special charges are presupposed with the project’s budget. Instead, the project will need $60,000 for its implementation (Marchewka, 2015). In such a way, the initial financial analysis identified that the project needs $3,717 for the establishment of a standard SQL Microsoft Server. It is the most basic application for average operations with database; thus, the project team has chosen the simplest software. Hence, approximately $1,200 will be needed for the installation of the user software. In addition, needs for hardware and associated equipment will take approximately $15,000, since a facility for a data warehouse should be provided. Expenditures on the data warehouse, however, may vary as associated costs depend heavily on the location and conditions provided for the installation of the data warehouse. Besides, considerations of physical security may be needed once they are not included in cyber safety costs (Marchewka, 2015). Prices for compulsory components of the information system may vary, but these variations are not drastic.

In regards to costs devoted to waging and rewarding human resource, they should be equal to $30,000 since the project requires substantial work. Moreover, the development of a custom information system is an especially complicated task; thus, costs spent on human resources may seem to be relatively high. Eventually, the security and technical support will need $10,000. It is possible that the project budget will have some unspent funds. They do not have to be terminated from the project as long as the project still needs a recovery plan (Marchewka, 2015). It will preserve the completion of the project and thwart the project team from overrunning the costs determined with the break-even point of the bottom margin. Provided that the project is planning to deploy the modified waterfall methodology, all processes involved in the project are linear. Therefore, costs associated with all activities are traceable (Marchewka, 2015). Generally speaking, the project with a linear methodology is expected to be budgeted with a respective linear approach. Overall, the initial financial analysis determines the basic costs and budget for the project, meanwhile a detailed scoping will optimize and finally allocate the expenditures.

Conclusion

It is appropriate to make a general comment on the fact that the information technology project for the School of Graduate Office is quite feasible even though the budget of the project is limited. First of all, the initial financial analysis specified associated costs and generally allocated them within the terms of a preliminary budget. In order to preserve the project from a failure, the initial financial analysis has suggested multiple solutions to the reduction of costs within the project. Provided that nowadays, computerization in the field of tertiary education is a common practice, the project is feasible with estimated costs and strategies of their reduction. A distinct outline of the expected deliverables facilitated formation of the most accurate cost allocation, so that the project team will not overrun the assigned budget. Finally, it is informative to note that a methodology of a modified waterfall is a linear approach to the IT project implementation. Thus, a similar linear approach should be taken in regards to cost estimates.