4.4 Budgeting Flashcards
1
Q
Definition of budgeting
A
Estimation and allocation of financial resources required for project activities
2
Q
Definition and features of cost control
A
- Monitoring and managing expenditures throughout lifecycle
- Align financial resources with goals
- Prevent budget overruns
- Ensure best use of funds
3
Q
Definition and features of creating a budget
A
- Based on approximations of time and cost
- Enable budget setting
- Enable considerations of affordability
- Support justification for investment
- Enables resource schedule to present costs over life of project
- Consider types of costs
- Consider external information needed to generate estimate
- Consider underpinning assumptions
4
Q
Cost Types
A
- Fixed
- Variable
- Direct
- Indirect
5
Q
Definition and features of cost planning
A
- When are costs going to be incurred over project
- Plan budgets to ensure organisational cashflow
- Resource histogram to create cumulative curve chart
- Direct costs added to histogram at specific points after variable costs calculated
- Actual expenditure on histogram can be tracked
- Variances on histogram can be shown on same curve
6
Q
Cost planning in linear lifecycles
A
- Funds released for entire lifecycle, or at each phase gate
- Scope fixed at outset
- New requirements require additional funding
- Cost overruns are common (budget based on early estimations)
- Scope creep is a danger to overall budget
- Benefits not generated until product has been adopted
7
Q
Cost planning in iterative lifecycles
A
- Assume a fixed cost and time
- Funding for 1 or several iterations rather than entire phases
- Scope flexed to fall within existing budget
- Fixed cost, fixed time, scope is flexed
- Funding allocated and released for each iteration
- New requirements can replace existing work
- Concentrate on product features that add most value
- Product is released during evolutionary development to generate early revenue
- Work packages are large, less precise chunks with rough budgets
- Work packages are developed in timeboxes
8
Q
Definition and features of cost control
A
- Maintaining careful control of expenditure against expectations
- Maintains a healthy cashflow
- Facilitates tracking of progress
- Enables forecast of future expenditures
9
Q
Included in cost control
A
- Committed costs
- Accruals
- Forecasts
- Cashflow
10
Q
Cost control system
A
- Identify variations or deviations from planned budgets
- Minimise project costs
- Identify and monitor areas of overspend
- Enables correction of overspend
- Informs future projects via lessons learned
- Enables changes to costs to be rolled into change management
11
Q
Definition and features of Earned Value management
A
- Quantify the value of completed work
- Multiply the percent complete against expected budget
- Enables trend analysis
- Enables understanding of variances
- Visual representation of progress
- Budget at completion (BAC)
- Planned cost
- Actual cost
- Earned value
12
Q
Earned Value breakdown
A
- Cost variance (negative means overspending, positive means underspending, aim for 0)
- Cost performance (<1 means overspending, >1 means underspending, aim for 1)
- Schedule variance (negative means behind progress, positive means ahead of progress, aim for 0)
- Schedule performance index (<1 means behind plan, >1 means ahead of plan, aim for 1)
- Forecast cost at completion (budget at completion / cost performance index)
- Forecast time to completion (duration / schedule performance index)
13
Q
Definition, features, and considerations of monitoring and reporting
A
- Keep track of spending and spot potential problems early
- Tailor monitoring and reporting to stakeholders
- Financial performance reported at gates, stage review, and audits
- Actual vs forecasted costs
- Actual vs forecasted spend
- Earned value analysis
- Estimated overruns
- Cashflow / drawdown
- Actual resource costs
- Cost of change requests
- Contingency drawdowns
- Project justification
14
Q
Types of report / systems
A
- Cost performance
- Financial performance
- Dashboards
- Cost benefit
- ‘Ad hoc’ excel
- Integration into organisational systems
15
Q
Definition and features of end of project
A
- Part of formal closure of the project
- Reassign resources
- Formally close contracts
- Update systems
- Surplus funding returned
