Preparation of Project Report
After the project plan is approved by the governing body of the organization and is available to the finance department, then the next step comes the efforts to search for various sources of funds. Funding can happen through debt or equity or a mix of them. A formal project report is now prepared, keeping in mind the requirements of the banks/investors.
The project report is an extremely important aspect of the project. It should be properly structured and also should have necessary and appropriate information regarding the project.
Preparation of project report is a pre-investment study of investment proposal but encompasses a thorough investigating process covering economic, technical, social managerial, and commercial aspects. The project report is a working plan for implementation of the project proposal after an investment decision by a company has been taken.
The importance of the preparation of the project report has been felt in the wake of sophisticated technology being adopted and the heavy financial state of public funds through financial institutions, banks, and investment organizations being contemplated. High technology involvement, the higher cost in the project implementation, and as such an economy cannot afford to tolerate the failure of the project. Therefore, to ensure before taking in hand a project whether or not the proposed project is viable, preparation of project report has become an essential exercise for all corporate units particularly in the light of the following background:
- Planning in advance, the accomplishment of the following objectives:
- Performance Objectives
- Marketing Objectives
- Operations Objectives
- Technical Objectives
- Financial Objectives
- Personnel Objectives
- Organization Objectives
- The end product Objectives
- The customer benefit Objectives, and
- The societal Objectives
- To evaluate the above objectives in the right perspective it is essential to consider the input data, analyze the data, predict the outcome, choose the best alternatives, take action, and measure results with predictions. Stress is laid that the objectives become measurable, tangible, verifiable, attainable and the risk of failures are avoided to the maximum desired extent.
- To evaluate constraints on resources viz. manpower, equipment, financial, and technological.
- To avail of the financial facilities that require a systematic project report to evaluate the desirability of financing the project. Besides, the financial intermediaries today check-up and verify the project proposals for accepting the responsibility for a company to procure funds from the capital market. Merchant banks who have entered the capital market as financial intermediaries are quite careful about the project viability before taking up a contract for making financial services available to corporate units.
- Successful implementation of a project depends upon the course of action suggested in the project report. Besides, comparison of results will depend upon the projected profitability and cash flows, production schedule, and targets as planned in the project report.