1. What are the answers to Steve White's questions?!
2. What other factors are relevant to this issue?
3. How do the changes in assumptions mentioneij^. by the other managers affect the proposal?
4. What position should Jim take? Why?
^ This article clearly describes the importance and impact of cost-related issues on a project. These issues can significantly alter the profitability and even success of a project. Costs are discussed from three viewpoints: that of the project manager, the accountant, and the controller. Not only are the amounts of expenditures and encumbrances important, but their timing is critical also. Perhaps most important is having a project cost system that accurately reports costs and variances in a way that can be useful for managerial decisions.
liiF-CT COSTER WORD
Project cost seems to be a relatively simple expression. but "cost" is more than a four letter word. Different elements of the organization perceive cost differently, as the timing of project cost identification affects their particular organizational function. The proiect manager charged with on-time, on-cost, on-spec execution of a project views the "on cost" component of his responsibility as a requirement to stay within the allocated budget, while satisfying a given set of specified conditions (scope of work), within a required time frame (schedule). To most project managers this simply means a commitment to project funds in accordance with a prescribed plan (time based budget). Others in the organization are less concerned with the commitment of funds. The accounting department addresses expense recognition 'elated to a project or an organizational profit and 'oss statement. The accountant's ultimate goal is reporting profitability, while positively influencing the htm s tax liability. The comptroller (finance department) Is primarily concerned with the organization's cash flow, it is that person's responsibility to provide the funds for paying the bills, and putting the unused or available money to work for the company.
To be an effective project manager, one must understand each cost, and also realize that the timing of cost identification can affect both project and corpo-f3te financial performance. The project manager must ke aware of the different cost perceptions and the "wnner in which they are reported. With this knowl-edge, the project manager can control more than the P'uiect's cost of goods sold (a function often viewed as the project manager's sole financial responsibility). The project manager can also influence the timing of cost to improve cash flow and the cost of financing the work, in addition to affecting revenue and expense reporting in the P&L statement.
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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.