As any project manager (PM) should know, Cost Management is the process of monitoring and controlling costs within a project and it enables you to determine the total cost of staff on the project, monitor the total actual cost Vs forecast cost, calculate total cost of undertaking each project task, identify current and potential over-runs and monitor the consumption rate of the project budget.
To achieve this effectively, you need a set of processes, roles and documents. Random management of cost management is a dangerous game to play, which is why you need to implement a structured cost management process using expense forms, an expense register, approval and project plan update procedures. All this can be split into three staged activities:
1. Document expense - a team member activity2. Approve expense - a project management activity3. Update project plan - a project admin activityIt's worth noting that the PMI cost management process is slightly different but it addresses all the same elements of fundamental managing cost in a project environment. The main difference is that the PMI process addresses resource planning, cost estimating and cost budgeting separately to cater for larger projects. The process I've shown has linked them as a single process.
So you need to create the following three documents:
- Cost Management Process
- Expense Form
- Expense Register
The form and register are straight forward enough, so long as you're clear about the type of data you need to be capturing. The expense form should be designed to record basic information such as amount, payee name, task ID, description, etc. This should be sufficient information for the project manager to have a clear view of what's being spent and for what.
The expense register monitors and controls the current status of expenditure with the project and it helps the project manager identify and resolve any spending issues so that the project can be delivered to budget.This will normally contain columns such as activity description, ID, expense ID, expense type, approval date, approver, payment status, etc.
The real work is in the creation of the process and this should be carefully defined before it is documented and introduced. The diagram above might help you.
With all this done, you're now ready to effectively manage cost and so help optimise your chances of delivering your project to budget.
The author Rob Llewellyn is founder of C-Level consultancy The Llewellyn Group, and since the 1990s has been providing project and programme management services to organisations across Europe and the Middle East. You can visit his web site at http://www.llewellyn-group.com
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Project Cost Management by Rob Llewellyn
