Project financial management is a combination of all of the money-related parts of governing a project. In many ways, this means it is a much broader scope of accounting. Unlike common accounting, project financial management is involved at every point of the project that involves spending or taking in money. While accounting would know the salaries of the people involved, financial management would look at the time spent versus salaries as compared to the overall plan for the project. Accounting is concerned with the monetary bottom line while financial management looks at the success of the overall project and the impact it will have on the business.
The most important part of project financial management is understanding that it crosses and uses all disciplines, departments and resources. It operates on the idea that a good project, when run correctly, will be efficient, on time and under budget. Every part of the project ties back into the money spent, so by controlling it correctly, the project will operate correctly.
Unlike many monetary systems, the overall money spent is often less important than how that money is spent. If a large expenditure will speed up a portion of the project and may cost less in the future, spending more money is recommended. This applies to manpower, resources and all other aspects of the project equally. For example, hiring a poorly-qualified person for less money would not be recommended, because that worker would slow the project. On the other hand, an over-qualified worker would cost more money and would only be justified if his additional abilities were deemed important for the project.
Most projects will have a detailed accounting of time and money spent. This forms the basis of most project financial management processes. In addition to disclosed records, additional receipts may be requested or secondary audits may be performed. This collection of data is typically used by the accounting department or a specialized management department to determine overall spending practices.