Meaning of Advanced Financial Management

In most projects, the issue of "advanced payment" vis-à-vis procurement management is very valuable. An advance payment is a prepaid expense from the client, paid to a vendor in advance for goods or services. The balance is paid after a successful project delivery.
Advance payments are meant to provide financial aid to the vendor by providing initial funding for jump-starting the project. It also shows financial commitment and project approval from the client.

Advanced payments are beneficial to the supplier, but are very risky for the client because the prepaid goods or services may not get delivered as planned. What if the vendor disappears with the advance payment? This would attack and distort the project's time and cost objectives.

In order to mitigate this project risk, the project manager may request a sort of surety before supplying the required advance payment. Most project managers would settle for an Advance Payment Guarantee (APG) from a reputable bank.

But banks often confuse the main goal of an APG on projects. Many times, the banks take care of operational risk while ignoring the aspirations of managing project risk.
For instance, banks in Nigeria, where I work, may request a 100 percent cash backed prerequisite for an APG. The insistence of 100 percent cash backup connotes seizure of the funds, which are meant for the project (as provided by the client).
It's good risk management on the bank's part. If the vendor flees with the advance payment, the bank would live up to its guarantees by taking the seized funds back to the client.

To a discerning mind, this antagonizes the essence of project risk management. The funds from an advance payment are primarily meant to be an inflow into the project to mitigate the initial funding challenges of the project. But the vendor would be exposed to sourcing the same funds that had been provided by the client, which would delay the project.

Any bank that is familiar with risk management should be willing to cater to the peculiar needs of the project objectives. There could be other ways of monitoring advance payment disbursement to the vendor as opposed to seizure of the entire funds while still expecting performance with the seized funds.

GE is HUGE tarp fund beneficiary

2009-11-05 10:07:15 by Lapis_Philosophus

GE has been regularly protected from the TARP rules. By taking advantage of its ownership of two tiny banks in Utah, GE was able to issue $80 Billion dollars worth of federally backed loans about one out of every four dollars available in the federal loan guarantee program.
And true to being a friend of the President, General Electric didn't have to go through any of the burdens other participants had to go through like the financial stress test. And now it seems they wont have to worry about any those pesky salary/compensation limits so Jeffrey Immelt and the senior management don't have to worry about the 14-18 Million in annual compensation they get with help from Uncle Sam

And, GE, maker of weapons ...

2012-01-31 16:11:37 by phantom_gecko

Mr. Dennis D. Dammerman served as the Management Director of General Electric Co., holding company of GEFS (Suisse) AG (also known as GE Capital Bank) and as its Chief Financial Officer from 1984 to 1994 and since 1995. Mr. Dammerman has exceptional leadership and financial management skills. Mr. Dammerman served as the Principal Executive Officer and Chairman of General Electric Capital Corp., (formerly, General Electric Credit Corp.). He has 38-year career at GE. He served as an Executive Officer of General Electric Company from 1998 to December 31, 2005 and also served as its Member of the Corporate Executive Office until 2005

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