This video details the most frequently used budget reporting graphs, and how they can be used to report status and add accuracy to your project management approach.
- Have you ever ordered a repair service to be conducted at your house, had the service provider show up, deliver the service and then ask you for more money than you agreed to? If you're like me it makes you hesitate to ever call that service provider again. You don't want to be the service provider in that story. With sound estimates you'll know at any point how much you should've spent and how much you have left to spend. But you can only maintain an accurate status of your project budget by having sound and complete budget reporting habits.
Let me share some of those good habits. First, ensure you aren't missing some commonly overlooked items. Here are a few of the most frequent culprits. Overtime, pay raises, and contract cost of living increases can add up and are often forgotten. You should also check on the waiting time for resources. Though you may know you have to wait, the costs of having other related resources idle and assigned to your project during that wait time can accumulate costs.
Exchange rate variances can also impact your project if you're using offshore resources or procuring products overseas. When you have incorporated these costs you can consider the second good habit. Creating easy to understand reports. My go to report is the Cash Forecast Over Time report. It forms the basis for other reporting that will expand your budget status information. I've included a sample in the exercise files for the course.
Next, compare your actual spending to the work you've actually accomplished. For example, let's say you have $200,000 to spend. When you plot your actual cashflow on the Cash Forecast report you can quickly note if your actual spending was below what you had planned for. That would suggest you're under budget. However, on closer analysis of your cash flow, you see that you're under budget only because you're behind schedule. Your cost data is suddenly put in a context.
The third reporting item I recommend is to produce detailed reports for areas where you are very cost sensitive. To provide this level of detail I use a resource histogram. This is a diagram that compares budgeted estimates with actuals to see if there's any variance. In this example you can see the costs and hours on October 10th were according to plan. On October 11th the worked hours exceeded your plan and the costs beyond that, presumably because of overtime payments.
You can quickly spot a trend via this diagram and can also efficiently show management the budget implications on the project. One last recommendation, and it's this. Be consistent. Have someone on your project team give you a budget report on a standard day each month. Remind them how important the information is and the accuracy that's required. These budget reporting habits aren't difficult but they sure can help you avoid cost blowout conversations you don't want to have.
Staying ahead of your budget reporting will help you maintain control of your project and your management team as well.
Note: This course follows the latest guidance from Project Management Institute, Inc., as outlined the PMBOK® 6 Guide.
- Recall best practices for project budgeting and estimation.
- Distinguish common estimation approaches used to build project budgets, and understand when to use them.
- Identify best practices for budget expectation management, while utilizing sound budget refinement techniques.
- Describe and explore agile project budgeting techniques.
- Review various approaches for correcting project budget overruns.
- Review sound budget reporting approaches, including how they can be used to report project status.
- Recognize the issues and changes that can put a project budget in jeopardy.