Actual Cost Management

CRI manages actual costs against budget by phase. Other companies may find it better to manage their actual costs on a month-by-month basis, but since CRI approves project budgets on a phase-by-phase basis, actual costs against budget are best managed by phase. An example is illustrated in Figure 13-8.

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Figure 13-8: Actual-to-Budget Comparison for the Fast-Food Robot Project at CRI

The actual costs for project resource budgets are automatically updated from the resource management system based on time actually charged to the project. Before CRI implemented actual time tracking, "actual" resource data were based on resource assignments. This approach was sufficiently accurate. Actual expenses are automatically updated from the company's ERP system, which maintains actual expenses in the general ledger and accounts payable systems. When these expenses are entered, they're charged to a project code, the Fast-Food Robot in this case, as well as to the account number.

CRI's actual-to-budget comparison tracks the percent of the budget used so far in each phase of a project. In March, the Fast-Food Robot project was halfway through the elapsed time of Phase 1, and the project team estimated that it was approximately 55 percent complete. Project costs are not always incurred proportionately to the elapsed time or the percentage completion, so comparing the percentage of budget to the percentage complete is only a rough indicator.

CRI requires that the project manager and financial manager review the actual-to-budget comparison every month and summarize any key items in a memo to the CFO, with copies to the Product Approval Committee. The actual-to-budget comparison, along with a memo, are attached to the Fast Food Robot's project management step in the DCM system, and all previous versions are available to everyone with authorized access. Here is the memo for the month of March:

To: Shaun Smith, CFO From: Anne Miller, Art Hall

Subject: March Actual to Budget for Fast-Food Robot

We continue to believe that we are closely tracking the project budget overall, even though there are some variances in particular categories: 1.

Most resource costs are tracking according to the assigned time and progress completed (55 percent). Our only concern is Mechanical Engineering, which is taking more time than expected due to some difficult design issues. We are in the process of rebudgeting this in the current budget.

Travel costs are high because we accelerated some of the customer visits in order to manage our time more efficiently, but we still expect this to come in at budget.

We have purchased most of the market research we need and expect to have a favorable variance of at least $100K for the phase. We were able to negotiate better discounts.

The percentage of the overall budget incurred is close to the progress we estimate that we've made so far. When we update the current budget we should still be close to the approved budget.

CRI maintains several different versions of the project budget. "Phase Approved Budgets" are established at each phase approval. These are the official record of what was approved, and each project team tracks the changes in its approved budgets as they progress though all the phases of development.

In addition, each project team maintains a current project budget that contains the current view of the expected costs for both the current phase and the entire project. It is expected that each project team will update this view of anticipated costs at least monthly. When the current project budget exceeds the approved budget by a predetermined percentage or amount, then an exception is automatically triggered by the DCM system and a new phase review is required.

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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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