Understanding Financial Management Variables

In your future, more advanced PM studies, you ll encounter some financial management variables that you may want to pay attention to— especially if your project is one that' s massive and requires that you pay special attention to all the financial details.

Note In spite of Objective 3.7, I wasn't tested on any of the following things in the IT Project+ test (never fear!). That being said, you might encounter a question or two on the test.

There are several variables, each of which is could be easily calculated either through spreadsheet or project management software calculations. We need to take some time to build some of the numbers that you' l l use to calculate these variables, so we ' l l start with some basic definitions, then move into how they combine with each other in real use. When you perform analysis on your project using the below-listed formulas and variables, you ' re performing earned value analysis. When you perform assessment on a project ' s earned value, you' re measuring how much of the budget you predict that you should' ve spent so far, given the amount of work you' ve already done on the task. You' re calculating the budgeted cost of work performed (BCWP). (The terms earned value and BCWP can be used synonymously.)

It' s important to also understand that your pristine project starting point— nobody working on any tasks yet, no money spent—represents the baseline of the project. It ' s important to fully describe your project ' s beginning prior to calculating any financial management variables. Project management software allows you to create save your work with a baseline before you start entering hours or materials costs.

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