DOWNLOAD PDF BUDGETING AND MANAGING RESOURCES

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1 Chapter 1 : Budgeting and cost control APM Project budget management is a set of activities for estimating the necessary amount of financial resources for the project, controlling project costs within the approved budget and delivering the expected project goals. To expatiate on that, we would be studying the concept of project cost management. What is Cost Management? Cost management in project management is the science behind the planning, allocation and control of the budget for a project or an organization. It is a process that makes certain that a project would be completed within an agreed upon budget and cost management in project management is a prerequisite skill for establishing yourself as a great project manager. A good project cost management plan ensures that the organization does not overshoot their budget, thereby maximizing profitability. The process involves a lot of project cost estimations and calculations, cost-tracking spreadsheet development, reviews and approvals from top management and the integration of a project cost management software. Resource Planning Resource planning helps the project manager determine how much human resource, raw material, equipment and facilities that would be required to deliver on the project. At this phase, the project manager would be looking at all the physical resources necessary for executing the project. A great way to do this would be to have a sit-down with a subject matter expert, professional associations and members of the project team to create a workflow structure work breakdown structure. This will aid in the identification of components of the project that would require certain resources. Cost Estimation This involves developing an approximate value of how much the resources identified are going to cost. The process involves identifying and examining different pricing alternatives with the aim of going with the option that is most profitable for the company without necessarily compromising on quality. At this stage, the project team would want to be considering resource requirements, the duration of activities, the work breakdown structure, information from previous similar projects concluded and resource rates labor fees per hour, wholesale versus retail costs. There are 4 techniques for estimating costs, they include: Analogous estimating Bottom-up estimating. Cost Budgeting Now that we have gotten our cost estimates, the next step would be to do the cost budgeting. This refers to the allocation of cost estimates to the identified project components that require a certain amount of resources. It makes use of the project schedule where costs are allocated by time periods, work breakdown structure and cost estimates to come up with a cost baseline for the project. The cost baseline is essential for tracking project management cost during the project life cycle. Cost Control Cost control involves tracking and measuring financial variances from the cost baseline that we came up with during cost budgeting. It could also be that the time duration for certain components of the projects were just not enough or the introduction of a more efficient software of tool into the market that was not available during the resource planning phase but which the project manager felt was a better fit for the project as opposed to a lower priced one that was initially agreed upon. It takes into cognizance any changes that might have occurred at the different project phases and alerts top management and stakeholders of all the relevant changes. Project Cost Management Software If you are looking for a great project cost management software, then you should check out the Nutcache project management web app. Nutcache is a great all-inclusive, cloud-based project management solution that comes with project cost management features. With that, project managers can easily: Was this post helpful? Please do let us know by leaving a line or two in the comment section below. Page 1

2 Chapter 2 : Budgeting Tools and Resources - Ameris Bank Budget and Resource Management (BRM) provides strategic financial planning and analysis for the vice chancellor and directors of Information Technology Services. Other services include business management, administrative operations, space planning, and facilities coordination. Developing and managing a budget is how successful businesses allocate, track and plan fiscal spending. Very similar to our personal finances, discipline and planning should be the cornerstone of a business budgeting process. So where do we begin? As with most things that come with managing an organization, budgeting needs to be driven by the vision what we are trying to accomplish and the strategic plan the steps to get there. Organizations that stay focused on their strategy and plan know exactly where they want to spend their resources and have a plan to help keep them from spending money in areas that do not line up with the vision what we are trying to do and mission why we are doing it. Strategic Plan Every organization, no matter the size should know why it exists and what it hopes to accomplish. This is articulated through a written Vision and Mission Statement. This ensures that organizational resources are used to support the strategy and development of the organization. It means budgeting toward the vision. Business Goals Annual business goals are the steps an organization takes to implement its strategic plan and it is these goals that need to be funded by the budget. Goals need to be developed and there needs to be accountability for achieving goals. This is typically the responsibility of the management team, board or business owner. The budget provides the financial resources to achieve goals. For example, if your organization has outgrown its facility and there is an objective to increase space, there needs to be dollars budgeted to expand or move the business operations. Revenue Projections Revenue projections should be based on historical financial performance, as well as projected growth income. The projected growth may be tied to organizational goals and planned initiatives that will initiate business growth. Fixed Cost Projections Projecting fixed costs is simply a matter of looking at the monthly predictable costs that do not change. Employee compensation costs, facility expenses, utility costs, mortgage or rent payments, insurance costs, etc. Fixed costs do not change and are a minimum expense that need to be funded in the budget. For example, if there are open staff positions, the cost to fill those positions should be part of fixed cost projections. Variable Cost Projections Variable costs are costs that fluctuate from month to month, supply costs, overtime costs, etc. These are expenses that can and should be budgeted and controlled. For example, if higher Christmas sales drive overtime costs temporarily, those costs should be budgeted. Annual Goal Expenses Goal related projects should also be given budgets. Each initiative should have projected costs associated with the goals. This is where the cost of implementing goals are incorporated into the annual budget. Projections of costs should be identified, laid out and incorporated into the departmental budget that is responsible for completing the goal. Target Profit Margin Every organization, whether they are for-profit or not-for-profit, should have a targeted profit margin. Profit margins allow for returns for the business owner or investors. Not-for-profit organizations use their profit margins to reinvest into the facilities and development of the organization. Profits are important for all organizations and healthy profit margins are a strong indicator of the strength of an organization. Board Approval The governing board, president, owner or head of the organization should approve the budget and keep current with budget performance. Again, similar to your personal finances, the owner should be reviewing monthly financial statements for the following reasons. To monitor budget performance. To be familiar with all expenditures. To safeguard the organization against misappropriation of funds or employee fraud. Budget Review A budget review committee should meet on a monthly basis to monitor performance against goals. This committee should review budget variances and assess issues associated with budget overages. It is important to do this on a monthly basis so there can be a correction to overspending or modification to the budget if needed. Waiting until the end of the year to make corrections could have a negative affect on the final budget outcome. Dealing With Budget Variances Budget variances should be reviewed with the responsible department manager and questions should be raised as to what caused the variance. Sometimes unforeseen situations arise that cannot be avoided so it is also important just like your personal budget to have an emergency fund to help with those Page 2

3 unplanned expenditures. For example, if the HVAC system suddenly goes down, and needs to be replaced, this would be a budget variance that needs to be funded. Good budgeting processes can help develop and advance an organization, while sloppy budgeting and monitoring of budgets can blindside an organization and affect its long-term financial health and viability. Finally, without customers, there are no revenues to budget. For this reason, strategic plans and budgets should be targeted at one thing and one thing only â the customer. This is why it is imperative to identify who your customers are, find out what they want and budget dollars to put systems and processes in place to meet their needs and exceed their expectations. If you would like to learn about budgeting for a small business, I love the Dummy books, Small Business Financial Management Kit For Dummies might be a great reference for you! Page 3

4 Chapter 3 : An Overview of the Nurse Managerâ s Guide to Budgeting and Finance 2nd Edition The Office of Budget and Resource Management (BRM) is responsible for strengthening USAID's resource planning processes and budget capabilities that prioritize investments and are informed by policy priorities and anticipated impacts. Manage costs and the budget Project Project Standard More Without a solid understanding of where your costs are going in a project, the project can quickly fail and become unprofitable. This article is one of many project management goals on the Project Road Map. The accidental project manager: Here are a few basics you should know first. There are also costs associated with materials, such as cement, boards, scaffolding, heavy equipment, and computers. And if you plan on doing any business traveling on behalf of the project, you need to consider the cost of airfare, car rental, and accommodations as costs that also need to be added to the project. Where do you enter it in Microsoft Project? The links toward the end of this article will help you. In general, most cost information is entered in the Resource sheet. It is there that you indicated whether a cost is for hourly workers, salaried workers, contractual costs for consultants, fixed or one-time costs for project materials, and so forth. View cost information After you enter costs for resources, tasks, or both, you can examine them to see if they need to be adjusted to meet your goal for costs. At some point, stakeholders will be looking for this information. Here is an example of cost information copied from the cost table in Project and pasted into Excel with a sparkline created for it showing the relative expense of the types. Here are three steps to help grow your cost skills. Then assign this resource to a few tasks to learn about the relation of work to duration and cost. Go back and forth between the Resource Sheet and the Project Information dialog box, making salary changes in the Resource sheet and seeing the totals change in the Project Information dialog box. Now you want to figure out how to do the same in Project Keep in mind, though, that the bigger and more complicated your organization, the more things you have to worry about when it comes to entering, analyzing, and controlling costs. It is there that you indicated whether a cost is for hourly employees and fixed or one-time costs for project materials. It also requires that you set baselines. Your organization may have strict policies regarding costs incurred from contractual obligations. Make sure you understand corporate policies thoroughly regarding whether you should enter into contracts with, say a vendor, and what type of contract you can enter into. A baseline is the plan as approved by all stakeholders. In Project, this is set on the Project tab. Keep in mind that when you set a baseline with Project, you set the baseline not only for costs, but for task durations and work estimates as well. Earned value is an industry standard for analyzing cost variances throughout the length of your project. A quick tool you can use are sparklines in Excel This example displays sparklines for earned value information copied from Project to Excel. You can also use Visual Reports in Project to create a more sophisticated PivotChart of earned value commonly known as an S curve. The skies the limit to analyzing Project information. Page 4

5 Chapter 4 : 10 Steps to Developing and Managing a Budget â The Thriving Small Business Start studying Ch budgeting and managing fiscal resources -key terms!. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Monitoring Expenditure Regular monitoring of expenditure is essential; not just to verify expenditure against target but also to identify changing patterns or circumstances that need corrective action. You should have procedures in place within your department to monitor progress against budget and objectives at regular intervals generally monthly. In addition, appropriate reporting and authorisation mechanisms should be in place. To monitor expenditure, the types of information you need include: When profiling the budget, planned expenditure patterns should be considered. For certain types of expenditure particularly non-staff costs it is likely that expenditure will peak and trough at particular points in the year actual expenditure to date future expenditure commitments balance of annual budget remaining. When actual expenditure and commitments together are compared to the full year budget, this will indicate the balance of budget remaining at the review point forecast outturn. This is the expected position against budget at the end of the year after taking into account all anticipated expenditure. The forecast outturn may not be equal to the original budget analysis and explanation of any positive or negative variances when comparing expenditure and forecast outturn to budget, together with a documented action plan in order to address adverse variances There are a number of reports in ubase that can help you with the monitoring of expenditure against budget. Information on the reports is available in the Reports catalogue. The monitoring of expenditure against budget should be regularly undertaken at an overall level by the Head of Department and, where appropriate, at a more detailed level by the individual budget holders. Meetings between the Head of Department and the individual budget holders should be held at regular intervals ideally monthly and any actions identified should be formally documented and agreed. Virement of Budget Between Cost Centres Where budget virements have been authorised there should be formal evidence of this by the Head of Department or nominee and a record held within the Department for potential review by Auditors or other staff in the event of a query. It is not necessary to systematically vire budgets across all cost centres in order to remove any possible variance. In these circumstances the original budget value should be left in place to aid future expenditure planning and to highlight to budget managers where variances have arisen. Virements are not required to simply match budget to total expenditure already incurred. The Pro-Vice-Chancellor for your Faculty will be mainly concerned with the control of expenditure within the overall Department, not at individual cost centre level. The materiality level for conducting a virement should be in line with the size of the original budget allocation. The capability to conduct budget virements in ubase should be limited in a Department to no more than three users. This is to ensure consistency of approach and that the required documentary evidence to support the need for the virement can be maintained. To request a journal, users should the details to the Finance Manager for their Academic Department or Professional Services Department or the Research Finance that looks after the account code to be charged. The details to be supplied when requesting a journal must include: This is to ensure that the use of journals has supporting evidence that is auditable. It is expected that the General Ledger code will be the same for both the credit and debit entry since journals should not be used to reclassify the nature of the expenditure ie GL code that was originally generated when the material group was first selected. Where this is not the case, details in the journal request should be supplied to explain why different GL codes have been indicated. For journals requesting the movement of staff employment costs, the supporting details provided must include the staff to which the transfer relates and the period concerned. For journals requesting the movement of incorrectly charged Internal Trade costs a specific type of journal is required. This is marked on a report as Internal Trade. It may be possible to move by journal fixed sums of employment costs but, for most corrections to staff employment costs, journals are not actually required. Again, the details required will include: As such, in order to protect all parties concerned with the journal transfer ie requester and inputter it is vital that the supporting details as described above are provided. Departments should be mindful of the administrative burden of gathering the evidence to support the request for a journal and the inputting process Page 5

6 itself. Consideration of journal materiality levels will of course vary from department to department and project to project depending on the size of the overall budget. Page 6

7 Chapter 5 : Department of Budget and Management Start studying KG - Ch 14 - Budgeting and Managing Fiscal Resources. Learn vocabulary, terms, and more with flashcards, games, and other study tools. To get started, download our budget worksheet. You can edit this worksheet as needed to fit your lifestyle and habits. Examples include salary from jobs, monthly child support or a social security check. After determining your monthly income, record it in your budget worksheet. Examples include rent, a monthly cell phone bill, monthly car payments and insurance. Record every penny you spend and how you spent it â whether you paid with cash, check, debit or credit card. From your recordings, you can determine the amount you spend on average for each variable expense. If your total budgeted costs expenses are greater than your total income, then you have negative cash flow. To fix this, you will need to lower your variable expenses. If your total budgeted costs expenses are less than your total income, then you have positive cash flow. You can spread the additional money into other categories or increase your savings category to start establishing a rainy day fund Flush Cash Flow. If your total budgeted costs expenses equal your total income, then you have a flush cash flow. This means that you have successfully created your budget. The goal is to only spend what your budget has allotted for. If your total difference is positive, you spent under your budgeted costs for the month. Sometimes this occurs if unexpected expenses emerge. But try the next month to only spend what has been allotted for in your budget. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Interested in Learning More? An experienced banker is ready to meet you and provide you with more information and tools. Click on the link below to find a banker near you. Page 7

8 Chapter 6 : Resource allocation and budgeting - Oxford Scholarship Project Cost Management, Resource Allocation and Budget Control In an earlier post, we identified "non-feasible budgets" as one of the major reasons projects fail; the post highlighted the demerits of working with an unrealistic budget and how adequate budgeting was critical to the success of any project. April 5, Albert Einstein once said, "Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted. Everything we count, such as financial data, does not necessarily "count" in the larger sense. Everything that does in fact count, such as the quality care that nurses provide, cannot necessarily be counted. How do you place a price tag on compassionate care? The reality is that healthcare costs are rising and reimbursement to our healthcare delivery systems continues to decline. Whether one likes it or not, healthcare is a business and nurses must become more fiscally savvy. Three major forces have driven the healthcare delivery system in the USA: At one point in time, there were approximately 47 million Americans that had no healthcare insurance. This created one type of access problem. With the Patient Protection and Affordable Care Act of, already over 11 million more Americans have secured health insurance coverage through state insurance exchanges. It is estimated that a total of 33 million Americans will seek such coverage. There are now financial penalties if one does not get insurance. This is really shifting the United States entrepreneurial model of insurance coverage to one of a mandated insurance model. This is actually a good problem to have. The access problem that will be created will be secondary to a lack of primary care providers. This edition of the book takes a much deeper dive into the mandates of the Patient Protection and Affordable Care Act of There is currently a shortage of physicians in primary care. The access problem created will be the lack of primary care services and providers to accommodate this increase. This is a prime time for nursing to seize the healthcare of the nation through the provision of excellent primary care services. Who is better prepared than nurses in our nation to really address wellness and health promotion? The United States healthcare delivery system has been traditionally an entrepreneurial type of system with many types of insurance products on the market -- such as a variety of managed care companies, health maintenance organizations, preferred provider organizations, independent professional associations, Medicare and Medicaid, self-funded health plans, self-pay and philanthropic contributions. Most states also have some form of charity care funding for indigent patients, and some states still have publicly funded hospitals for those without insurance coverage. Today, healthcare reimbursement is being ratcheted down to providers and hospitals. The landscape of healthcare has been fundamentally changed from years past. Many hospitals have closed their doors secondary to financial woes. Many hospitals have merged with larger health systems. Some futurists predict that there will be no more than to large regional health systems. Others have more drastic predictions such as no more than 9 to 10 large health systems throughout the country. These changes are what really drive nurses to become more astute in the world of finance and financial management. Budgeting for Nurse Managers Nurse managers must be familiar with the budgeting process. Two budgets that nurses manage on a daily basis are the operating budget and the capital budget. The budget process is ongoing and dynamic, and it provides feedback. When managers begin to prepare a budget, they collect data, plan activities and services, implement the plan and evaluate the outcomes. In developing the operating budget, you must determine what services are offered or are going to be offered if a new service is planned, the payer mix, the patient mix which relates to acuity, the case mix index, the staff mix and the standards of care that drive the nursing hours of care per patient day. The nurse manager also needs to determine what the patient outcomes are and whether there are plans to change the services or resources utilized. The budget plan is then developed and the forecast is provided for what resources will be needed to deliver the anticipated services. Following development of the budget, with final tweaking by the finance team and the administration in the organization, the budget is submitted for approval. After implementation of the budget, outcomes must be monitored frequently so variances can be identified and corrected for the next budget cycle. If there is a negative variance, you must determine the source. There are 3 major factors that create variances: The operating budget includes all full-time equivalent personnel and all expenses and revenue for day-in and day-out operations. A Page 8

9 nurse manager must take timely action when costs exceed revenues. Nurse managers must have access to timely, understandable reports. The capital budget includes major movable equipment and fixed assets. An example of a fixed asset would be renovation of the nursing administration suite. The capital budget that nurses and nurse managers are generally responsible for is the major movable equipment budget. Each organization defines the minimal amount that must be budgeted in the capital budget. The dollar amount when one begins budgeting capital items can vary by organization. Another consideration when budgeting major movable equipment is the expected life of the equipment and its depreciation value. Consider a nurse manager who wants to budget for a new portable cardiac monitor. This is an emergency budget line so that if a piece of equipment becomes nonoperational, it can be replaced with funds that have been approved in the contingency line. One looks much better in front of a Board when a new item is being requested if there is a contingency line existent in the budget. It is a well-known fact that poor quality increases cost, whereas quality-driven hospitals have lower costs. Every nurse should manage their respective unit or units as if it were their own business, regardless of whether they are managing in a not-for-profit health system or a for-profit health system. If it were their own business, they would want the business to turn a profit so that the business would survive. This is true in the healthcare delivery systems that nurses manage. Being fiscally savvy and managing our budgets well will assure long-term survival of our organizations. Sigma Theta Tau International Publications; Sigma Theta Tau International Publications,, Page 9

10 Chapter 7 : Office of Budget and Resource Management U.S. Agency for International Development planning, budgeting, Estimates and reporting on to a resource basis, places the United Kingdom government amongst the world leaders in financial management reform in the public sector. This framework involves cost planning and control. For successful delivery of the project product, the project manager should effectively estimate costs, track expenditure over time and adequately react to situations when the financial resources are over-spent or under-spent, or there are opportunities for savings in the project budget. It is the primary financial document that constitutes the necessary funds for implementing the project and producing the deliverables. The project budget gives a detailed statement of all the direct and overhead costs required to carry out the project goals and objectives. A project budget template should be designed and managed under supervision and control of the project manager. Also the customer and sponsor should be involved in allocating and managing financial resources. Project budget management is a set of activities for estimating the necessary amount of financial resources for the project, controlling project costs within the approved budget and delivering the expected project goals. Steps of the Budgeting Process As an independent process, project budget management includes a series of steps to define and produce a budget sheet. The key steps include: Budget Development The first step of the project budget management process involves the project manager in developing cost estimates and identifying the total amount of money resources necessary for implementation of all the tasks and activities defined and stated in the WBS and the Schedule. Budget development should cover both capital and operating expenses to ensure successful project completion. The project manager needs to define funding requirements and then send a formal request to the sponsor who reviews the requirements and make a package decision on providing the necessary money and financial resources. The sponsor can use the initiation documents like Feasibility Study, Business Case and Project Charter to make that decision. Such estimation methods as expert judgement, cost baseline measurement and cost aggregation can be used for developing a project budget sheet. The project manager in cooperation with the key stakeholders can use a combination of the methods to estimate a necessary amount of financial resources and develop a project budget template. Budget Use The second step in project budget management is to allocate the identified financial resources and start executing the budget. The project manager should control and keep track of the budgeted resources in order to make sure that every scheduled task or activity is performed with necessary funding and that there is no lack of money for the implementation of the entire project. The greatest way to track and control budget use is to develop an investment plan. This formal document includes justifications and approvals for the acquisition of necessary procurement items and services required in support of the project. An investment plan describes the acquisition process with reference to the feasibility study often in larger projects a feasibility study template serves as a foundation for developing a project investment plan. In case the plan is approved, the manager uses it to control the budget execution. In case the document is rejected, the project manager should receive stakeholder suggestions and make necessary amendments to the plan template. Then the process may repeat until the plan is approved. Budget Measurement The third step in managing the project budget refers to taking actions necessary for providing appropriate cost performance. The manager needs to use work performance data like status of the deliverables, cost-schedule estimates, the funding requirements request and the cost performance baseline to check the budget appropriateness. By conducting variance analysis, performance reviews and forecasting, the project manager can compare the current cost performance against the planned amount of financed resources stated in the project budget template. In case of any gaps or deviations it is necessary to make formal change requests and modify the budget accordingly. The project manager can develop corrective actions and send suggestions for approval to the key stakeholders. The further budget control and measurement should be done with the necessary evaluations and approvals. Budget Updating Once all the changes have been approved by the key stakeholders, the project manager can proceed with updating the budget sheet and make changes to the existing breakdown structure of financial resources. This will be the forth step of project budget management. Cost estimates, resource activity estimates, the cost performance baseline and the cost management plan Page 10

11 should be updated in accordance with the approved changes. He took a variety of roles and responsibilities for planning, executing, performing and controlling software projects and project activities. Today Eric helps software development companies in reviewing and improving their software definition, development and implementation processes. Eric is one of the most honorable contributors of MyManagemetGuide website. Page 11

12 Chapter 8 : OHR Budget and Management Services â Human Resources â UWâ Madison The mission of the Budget and Resource Management department is to provide the highest quality decision support and resource management services to the UCSF enterprise in order to optimize acquisition and financial stewardship of University resources in support of instruction, research and public service to advance health worldwide. The base cost estimate is made up of known costs such as: Costs have four possible attributes. They may be direct, indirect, fixed or variable: Costs may be organised into a cost breakdown structure CBS where different levels disaggregate costs into increasingly detailed categories. Contingency is money set aside for responding to identified risks. A management reserve covers things that could not have been foreseen, such as changes to the scope of the work or unidentified risks. The more uncertainty there is, the more management reserve is required; so highly innovative work will need a larger management reserve than routine work. Once the cost estimate, contingency and management reserve are agreed with the sponsor, these become the budget. This shows cumulative expenditure against time and gets its name from its typical shape. This profile of expenditure is used in project financing and funding. It allows a cash flow forecast to be developed, and a drawdown of funds to be agreed. There should be strict guidelines or rules for managing the contingency and management reserve funds. The P3 manager will have control of the base cost. The sponsor retains control of the contingency and management reserve funds, which may be held as part of broader organisational funds. Once the work is under way, actual and forecast expenditures are regularly monitored. Costs are tracked either directly by the P3 management team, or indirectly through operational finance systems. Where P3 managers are reliant upon information from operational systems, the information needs to be checked to ensure that costs have been posted correctly. The normal payment process means that three types of costs must be tracked: The forecast cost is then the sum of commitments, accruals, actual expenditure and an estimate of the cost to complete the remaining work. Actual expenditure inevitably varies from planned expenditure. While the P3 manager will have responsibility for day-to-day management of costs there must be thresholds that require the involvement of the sponsor. These are known as tolerances and, if expenditure is predicted to exceed the tolerances, the manager must escalate this to the sponsor in the form of an issue. Periodically, the viability of the project, programme or portfolio must be reviewed formally. Sunk costs are actual and committed expenditure that cannot be recovered, plus any additional costs that would be incurred by cancelling contracts. Completing an overspent project or programme may be considered worthwhile if the remaining cost to complete the work is less than the eventual value. Project After the initial comparative or parametric estimates, the detailed cost of a project will be estimated bottom-up using the work breakdown structure WBS. By classifying costs in accordance with the WBS, CBS and organisational breakdown structure OBS, they can be reported in any combination of cost type, resource type and part of the project. Estimates may be drawn from internal costs such as salaries or external costs such as provider quotations ; they may be drawn from previous experience of similar projects or be more speculative where the work is innovative. Where cost estimates are difficult to pin down, three-point estimates of optimistic, pessimistic and most likely costs allow a statistical analysis of the overall project cost. The baseline cost can be used as the basis for earned value management EVM. This assumes that the cost of performing the work constitutes its value. The value of work performed at any point can then be compared to the actual cost of performing it and the value of work planned to have been performed at that point. The type of work in a project is usually in a narrow range. This enables earned value management to make predictions about future performance based on performance to date more accurately than techniques such as critical path analysis. Many internal resources on a project will not be fully dedicated to the project. They may be part of a matrix organisation where their time is split between business-as-usual and multiple projects. In this situation, it is important to have a system of cost allocation that accurately reflects the costs consumed by the project. Programme Programmes frequently cut across operational departments and may be funded from different sources. The programme manager must understand how the budget is funded so that cost reports can be fed back to the appropriate stakeholders. Within a diverse programme there may be innovative projects and routine projects. As well as projects, costs will be incurred in business-as-usual areas. Page 12

13 The estimating accuracy across the programme will also vary widely. At any point in time the programme will include projects that are well defined and accurately costed, projects that are in the future and yet to be defined, benefits realisation work that is clearly part of the programme, and business-as-usual work that is arguably part of the programme. A programme support function will need to establish clear cost accounting procedures that are adhered to by all projects and benefits realisation work. Business change managers will need to be clear on business-as-usual costs that can be allocated to the programme. Portfolio Portfolios are aligned to corporate financial cycles. Budgets for portfolios are less concerned with the cost of delivering a specific result, and more to do with what can be delivered within a defined budget. The prioritisation and balancing phases of the portfolio life cycle depend upon a good understanding of the costs of the component projects and programmes. One of the most common causes of cost control problems is over-optimism about what can be delivered within the available budget. It is unlikely that cost variance reporting will be appropriate for the portfolio as a whole, but it may be appropriate for categories of project and programme within the portfolio. The portfolio management team is responsible for setting standards of cost estimating, accounting and reporting across all the component aspects of the portfolio so that sound decisions can be made. Chapter 9 : Project Budget and Financial Resources Budgeting is the primary way that you can take control of your finances. Simply put, a budget is a written plan for how you will spend your money. You can create a monthly or an annual budget. The budget allows you to make financial decisions ahead of time, which makes it easier to cover all your. Page 13