Successful projects accomplish the stated project goals, with minimal scope creep, and do so within the approved budget. Cost management processes are in place to help project teams plan and control budgets throughout the life of a project. While this is a very complicated process, it is broken up into four categories:
While resource management is in place to plan, allocated, and schedule the resources needed for each stage of a project, resource planning looks specifically at the costs associated with each of these resources. Because of the complexity of this process, a work breakdown structure (WBS) can help to simplify and provide clarity. Identify what resources will be used to complete each item in the WBS and determine the associated costs.
Cost estimation is the process of approximating the costs associated with each of the resources required for all scheduled activities. Cost estimating forecasts the cost of completing a project within a defined scope. Given that scope tends to shift throughout the life of a project, cost estimation is not a one time process. Effective cost management requires project managers to iterate on cost estimations whenever scope changes or change requests are approved. These estimations provide a summation of all costs involved in successfully finishing a project, from inception to completion.
Cost estimations lead directly into the cost budgets. Combine individual activity cost estimates into a total project cost, establish the timing of the costs, and measure the progress of the project against the approximated baseline costs. These budgets should account for everything from direct labor costs, to material costs, factory costs, equipment costs, administrative costs, and software costs.
Monitor the project budget and manage variations to the cost baseline in the project plan. Controlling the budget requires being aware of the original budget, approved costs, forecasted costs, actual costs, and committed costs. If there are any changes to scope or if unforeseen risks have an impact on the approved budgets, the project manager will need to review the level of impact and take corrective action as needed.
Work management software
A work management software like Workfront provides a centralized location for all project data and information, helping you to stay aware of variances in the budget, make approvals, track comments, and more.
Other knowledge areas
- Integration management: Integration management helps teams work together more seamlessly. It takes various processes, systems, and methodologies and brings them together to form a cohesive strategy.
- Communications management: Communications management outlines the processes and procedures needed to ensure that information and data throughout the life of a project are properly collected, stored, and distributed across the project team.
- Quality management: Quality management is the process of continually measuring quality throughout the life of a project and making necessary changes until the desired quality is achieved.
- Time management: Time management involves analyzing and developing a schedule and timeline for project completion. Formalized time management processes provide a buffer for things like unexpected roadblocks and misestimated timelines.
- Resource management: Resource management is the process of effectively planning, scheduling, and allocating all resources needed to execute on a project. This process touches on everything from financial resources to human capital.
- Risk management: Risk management is the process of mitigating the potential negative impact unforeseen events can have a project's cost, time table, or other resources. This process should be accounted for from start to finish on all projects.
- Scope management: Scope management is the process of actively managing what is and is not included in any given project. The scope should be defined in the planning phase of a project and should be reviewed throughout the execution to minimize scope creep wherever possible.
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