Control your Project cost Using MS Project—2
-- Vivek Prakash
In the last post we discussed about why managing the cost of the project is important, relationship between resources and cost, how cost is calculated for different type of resources, what information is to be provided while assigning resources to tasks and when cost is to be accrued. We are taking this discussion ahead in this post to understand how cost can be managed in various real life situations.
Suppose a resource has to travel every time he/she starts a new assignment on your projects or a material is transported whenever it is used on an assignment. Cost of travel and transportation is to be accounted whenever the tasks is started. This can be handled by providing a per use cost. Per use cost is one time cost specified for a resource. This cost is incurred every time resource is used. This is always accrued at the start of the task.
Let’s look at another situation where cost is fixed for a task. Suppose you have to paint a wall and your painter has quoted 5 days of efforts. The cost of the task is calculated by multiplying rate of the painter and his efforts. In this case if painter takes 6 days, the cost of the task will escalate. If painter has quoted a fixed price, you need to pay him that price irrespective of rates, efforts or duration. You can assign quoted prices as fixed cost to the tasks to which resource is assigned. Fixed and variable both cost can coexist. If a professional has to travel for a specific tasks then the cost of travel is to be accounted in the cost of the task. This cost of travel will not change if that professional takes more or less time on the tasks. You can specify the travel cost as fixed cost for that task to account it in task cost.
Every project secures a budget before starting and it is important to track the budget during planning and tracking to complete the project within secured budget. A budget resource help you doing so. In MS Project you can define budget resources and assign it to the project. You can define a cost resource and mark it as …
… budget resource. Allocate this resource to Project Summary Task and provide the budget amount. This will work as budget for your project and help you tracking the same during planning and implementation. The allocation of budget will not stop you exceeding it during planning and implementation but help knowing if you are over budget or under budget, so that you can take appropriate measures.
Now you have an idea about various features for managing cost on in MS Project, next step is to understand what is important for you from the cost perspective.
If you are leading an IT project, your primary concern would be cost of the people, if you are managing a construction project, primary concern would be material and if you are a government organization or funding company, your concern primarily be tracking fund consumption against the project progress. On most of the project, you may be tracking cost for all three types of resources.
For preparing a time phased budget for the project, cashflow is important. For the cashflow, it is important how cost of the resources is accrued. The per use cost always accrued at start of the task. You may choose the method of the accrual for other costs — at start, at finish or prorated. You make sure to choose the method based on how you are planning to procure your resources and availability of the funds to your project. When you plan the project and allocate the resources to task, you can check on the cost table how much fund you need and can verify this against budget allocated to project.
During implementation, when you update project progress, actual cost start getting reflected in the project plan. If you have chosen accrual at start, complete actual cost reflected on start date of the task, if accrual is selected at finish, complete actual cost will be reflected on finish date. If accrual is selected prorated, the actual cost will be calculated as follows. For work resources actual cost is calculated based on actual hours spent. Material cost is calculated based on actual progress or actual amount of quantity updated in plan. Actual cost of cost resource is not calculated based on progress or efforts but has to be updated in the project plan with actual figures.
You would have got a fare idea about how cost is managed using MS Project however cost is so important and there are so many situation in real life, it will be difficult to explain all in a blog. If you are facing any challenge, you can drop a mail to me by clicking here, I will be happy to help you addressing the project need.