Creating the Project Budget

Good news! Many of the tools and techniques used to create the project cost estimates are also used to create the project budget. The following is a quick listing of the tools you can expect to see on the CAPM and PMP exams:

• Cost aggregation Costs are parallel to each WBS work package. The costs of each work package are aggregated to their corresponding control accounts. Each control account is then aggregated to the sum of the project costs.

• Reserve analysis Cost reserves are for unknown unknowns within a project. The contingency reserve is not part of the project's cost baseline, but is included as part of the project budget.

• Parametric estimating This approach uses a parametric model to extrapolate what costs will be for a project (for example, cost per hour and cost per unit). It can include variables and points based on conditions.

• Funding limit reconciliation Organizations only have so much cash to allot to projects—and no, you can't have all the monies right now. Funding limit reconciliation is an organization's approach to managing cash flow against the project deliverables based on a schedule, milestone accomplishment, or data constraints. This helps an organization plan when monies will be devoted to a project rather than using all of the funds available at the start of a project. In other words, the monies for a project budget will become available based on dates and/ or deliverables. If the project doesn't hit predetermined dates and products that were set as milestones, the additional funding becomes questionable.

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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