Who Needs Cost Management

In every firm, cost management will exist in some form, usually under the control of the finance function. Our problem as project managers is that often that form is not consistent with the project management function, and that the cost data cannot be integrated with the other project data. As a result, many of the critical management questions concerning cost go unanswered.

For instance, if the monthly accounting report notes that Omega Project has accumulated costs of $123,999, is this good or bad? Without integrating the accounting data with the other project data, much of the data is worthless.

How do we go about answering such common questions as:

• How much will you have spent when the project is over? Is this good or bad?

• If I'm in trouble on costs, what can I do to turn things around?

• How shall the costs be distributed?

• How can I control my resource costs?

Effective cost management must address such questions. This requires an integrated schedule and budget plan. It also requires integrated participation by leaders of the projects, resources, and financial disciplines.

Trap I have often run into situations where the schedule is being processed using a CPM tool, while the cost plan is processed in a spreadsheet. This continually leads to a mismatch of data. For instance, I have seen instances where the schedule was deliberately slipped by two months, but the cost spreadsheet did not change. Of course, the costs are driven by the schedule. So the spreadsheet-based budget was now totally out of synch. But nobody seemed to know or care. This is not an acceptable practice. The schedule and cost plan must be integrated.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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