From the course: Project Management Simplified

The six combinations of progress and spend

From the course: Project Management Simplified

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The six combinations of progress and spend

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- Step 10 of project management is to keep an eye on your costs and make sure you're not going to end up overspending. And it's a little bit tricky because when we look at overspending or underspending, we need to compare the money with how much progress we've made in exchange for that money. Maybe an overspend is okay if we've done more than we planned to. So let's talk about the six combinations of progress and spend. I've put the six combinations in order of increasing accountant happiness. So the first one is the worst-looking case. The accountants are not happy. The accountants are saying, "We're way overspent," and I think we are overspent. But at least we're a little bit ahead on the progress and that means that at least some of the overspend is because we've done more than planned. We've spent 720, yes, but we've done maybe 600's worth instead of 500. And so, we're only over by 120, not the 220 that the accountants are seeing. We're not as overspent as the accountants think because they don't know about the bit extra that we've done. This next one is also ahead and overspent, but quite different because we're so much further ahead and much less overspent. We've only spent 650 compared to the planned of 500 and look how much extra work we've done for that. So for this one, I'd say we're actually underspent. Unless there's a sting in the tail, we need to just check what is that last task still to be done. It might be something expensive. Also, if we're ahead and underspent, it just seems too good to be true. We need to check that the quality of what has been done is okay. But otherwise, good job. Next we have one of the commonest combinations. A bit overspent compared to our planned spend budget of 500 and a bit behind on the rate of progress. This one is worse than it looks because some of our overspent is hidden by our lateness. We've spent 550, a bit more than we should've, but we've only done maybe 450's worth. So we're actually over by about 100, not just the 50 that the accountants can see. And it's also hard to fix because catching back up on the time will cost more money and make the money situation worse rather than better. Basically, you can't fix both the time and the money at the same time. So number three is not good and it's common because any problem like, for example, having to do a task twice is going to make you both late and overspent. Number four is the one the accounts love, spot on. But should they love it? No because we haven't done all the work. We've only done about 450's worth but we've spent 500. So we are actually overspent as well as late. This type of situation can easily happen when your project is people only. Your team costs exactly what you expected but they're behind on the work. So you're overspending, perhaps without realizing. Then there's number five which is the worst one of all and yet the accountants can't see it unless they have access to the Gantt chart. You've overspent massively on that first task, you've spent 450 and you've only done one task, which is probably meant to only cost about 200, and you're horrendously late and yet, the two combine to give you a figure of 450 spent so far which sounds okay, slightly under budget, what could be wrong with that? This really shows the need to separate out the spend from the activity rate. But also, keep an eye on nonlinear spend because maybe that first task was meant to cost 450 and all the other stuff that you haven't done, because you are behind plan, is only another 50's worth. It's a hope to cling to until you check what that task actually was. Finally, there's situation six where you're slightly behind on progress but you have spare money which you can use to catch the time back up, if you want to. So that's the thought process where you combine the actual and planned spend figures with the amount of progress made which you can get from the Gantt chart. And you keep half an eye on nonlinear spend. Is the work that you've done or have not done, or still have to do significantly more expensive than the rest of the job? The big point really is always check your Gantt chart when you're looking at financial information. And the interpretation is then pretty much common sense.

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