This document discusses cost management in project management. It defines cost management as the process of planning and controlling a project's budget to predict expenditures and prevent going over budget. It outlines key cost management principles like cash flow analysis, tangible vs intangible costs, direct vs indirect costs, and importance of identifying all project costs, getting approvals before purchases, and keeping costs and financial plans up to date. The document also discusses how cost management is implemented through tools like cost management plans, cost baselines, activity cost estimates, and performance measurements. It provides examples of how project management software like Primavera and MSP can help with cost management functions like budgeting, earned value reporting, and managing expenses.

1. COST MANAGEMENT
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2. What is Cost Management?
• Process of planning and controlling the budget of
the project.
• Cost management predicts the expenditure and
reduce the project from going over budget.
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3. Principles
• Cash Flow Analysis (Estimated project cost and
benefit of project organization).
• Tangible Cost (Can be measured)
 A task that was allocated ₹150,000 but actually
costs ₹100,000 would have a tangible benefit of
₹50,000.
• Intangible Cost (Monetary cost)
 Research related areas
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4. Principles
• Direct cost (Directly related to project)
Salary
Purchase of software
• Indirect cost (Not directly related to project)
Electricity bill
Telephone bill
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5. Why is it important?
• Identify each of the costs within your project
• Ensure that expenses are approved before
purchasing
• Keep a central record of all costs incurred
• Control the overall cost of your project
• Keep your project and financial plans up-to-date
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6. What does it include?
• Budget
• Benefit
• Spending
• Expenses
• Funding
• ROI
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7. How is it done in project?
• Cost Management Plan
• Cost Baseline
• Activity Cost estimates
• Performance Measurements
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8. Cost in Project Management
Estimate Cost
Determine Budget
Control Cost
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9. Estimating Cost
• Projected cost of a project.
• Analogous Estimating
• Parametric Estimating
• Bottom-up Estimating
• Three-point Estimates
• Cost of quality
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10. Determine Budget
• Cost Aggregation
• Reserve Analysis
• Historical Data
• Funding Limit Reconciliation
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11. Control Cost
• Earned Value
Management
• Forecasting
• To-Complete Performance
Index (TCPI)
• Variance Analysis
• Performance Reviews
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12. Earned Value Analysis
• Planned Value
– Total cost estimate planned to be spent
on an activity during a given period
• Earned Value
– Estimate of the value of the physical
work actually completed
• Actual Value
– Total of direct and indirect costs
incurred in accomplishing work on an
activity
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13. Rate of Performance
• Ratio of actual work completed to the percentage of
work planned to have been completed at any given
time.
• For example, suppose the server installation was
halfway completed by the end of week 1; the rate of
performance would be 50% because by the end of
week 1, the planned schedule reflects that the task
should be 100% complete and only 50% of that work
has been completed.
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14. Cost Budgeting
• Allocating the project cost estimate to individual
work items over time
• Provides info for project funding requirements
• Estimating costs for each major project activity
over time
• Used to measure and monitor cost performance
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15. What are the benefits?
• Meeting budget goals.
• Realistic project estimates.
• Earned value Management
• Cost accounts
• Rate of performance
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16. What are the benefits?
• Project is completed within an approved
budget.
• Accurate cost estimates and realistic budget.
• Return on investment (ROI)
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17. How does Primavera help?
• Budgeting
• Labor cost
• Earned Value Report
• Cost Variance
• Total Project Costing
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18. How does Primavera help?
• Cost Account
• Project Expenses
• Manage Currency
• Budget Summary
• Funding Details
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19. How Does MSP help?
• Earned Value management
• Planned and Actual value
• Manage currency
• Project expenses
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21. Thank You
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