PROJECT MANAGEMENT ESSENTIALS

Budgeting and Cost Control Definitions

Actual Plus Estimate to Complete. A forecasting method that takes the actual costs that

have occurred and adds them to the planned cost of the remaining work. It may be that the

productivity of the project labour had been underestimated and therefore the remaining work

needs to be re planned. The new planned cost would then be added to the cost to date.

Actual Plus Remaining Budget. A simple forecasting method which adds together the

actual costs that have occurred to the remaining budgeted figure, i.e. assume in month six

£15,000 has been spent, out of a total budget of £30,000. However, our plan estimated that

in month six we should have only spent £10,000. This would mean the forecast total would

be £15,000+£20,000, i.e. £35,000.

Actual Expenditure. Is the money that has already been paid.

Cash Flow Forecasts. A prediction of the difference between cash received and payments

to be made during a specific period or for the duration of the project.

Commitments and Accruals A binding financial obligation, typically in the form of a

purchase order or contract. The amount of money removed from the budget by this

obligation. Accruals are the work done for which payment is due but has not been made.

Cost Monitoring and Control, and Cost Reporting. As part of monitoring, the performance

of a project is reviewed at regular intervals. Reviews should consider non-financial

information such as scope and schedule, to assist with the assessment of cost performance.

The budget should be reviewed at appropriate points; for example, as part of periodic

reporting and at gate reviews.

Forecasting. It is vitally important to record, monitor and compare our costs against the

budget. This tells us how we are doing against what we planned to do. However, more

importantly, we need to know what still has to be done, the cost of it and how that compares

against our final budget. There are several forecasting methods, none which will provide a

totally accurate figure, but can give a reasonable indication of the project’s expected

performance.

Forecast Out-Turn Cost. The cost of actual expenditure, accruals and the estimate of the

costs to complete the work to the end of the project.

Planned Expenditure. The planned charge against available funds, evidenced by a

voucher, claim or other document. Expenditures represent the actual payment of funds.

Trend. This is where the trend of the costs or times to date is applied to the remaining work.

Several calculations can be applied.