22 Budgeting and Cost Control

Question 1

What is the difference between budgeting and cost control?

Answer 1

Budgeting provides an estimation and allocation of financial resources that are required for project activities.

Cost Control focus on managing expenditures throughout the project lifecycle.

Question 1

How does a PM create a budget?

Answer 1

Budgets are created from estimates.

Using the WBS and allocating a cost to each work package can be used to create a budget.

Question 2

What are all the different types of costs involved in a budget?

Answer 2

Fixed
Variable
Recurring
Non-recurring
Direct
Indirect

Question 3

What is a best practice method of cost control?

Answer 3

EVM - plotting budget against actuals and value of work to date.

Question 4

How do you monitor and report financial performance?

Answer 4

You monitor financial performance by looking at the baseline and see how the project is performing against it.

Some ways to measure financial performance :

• actuals against planned
• actuals vs actual work achieved
• resource costs
  -change request costs

There are reviews of financial performance that can happen as per decision gates, stage reviews, external audits etc.

Question 5

How does one close down finances at the end of a project?

Answer 5

-Reassign resources
-Formally close contracts
-Accounting and management systems updated
-Surplus funding returned