This presentation first explains budgeting and costing in project management and then shows how Celoxis helps.

1. Part 3 : Budgeting & Costing

2. What is a budget?

3. The money that can be spent to get
something done

4. We all are familiar with budgets in our
daily lives...

5. Whether we are purchasing a house or
a television... we all have a budget

6. A project too has a budget...

7. ... a project's cost should not exceed its
budget.

8. Project Manager's Objective :
Actual Cost < Budget
In plain English :
To spend less than what he has

9. What are the costs incurred in a
project?

10. Project Costs
●Employee Salaries
●Consultant Fees
●Material Costs (e.g. photocopies, cement)
●Fixed Costs (e.g. rent)

11. Project Manager's Objective :
Salaries + Material Costs + Fixed Cost
<
Budget

12. How do you decide the budget?

13. Short answer...
Estimated Cost

14. Estimated Cost is the cost the project
would incur as per the project plan

15. Est. Cost = Est. Salaries +
Est. Material Costs +
Fixed Cost

16. For a project to be feasible :
Budget > Estimated Cost
In plain English :
You should have more than what you
are planning to spend

17. If the project manager was allocated a
budget and ...
Allocated Budget < Estimated Cost...

18. Either....
Reduce scope (to reduce cost)
or
Increase budget

19. So that...
Budget > Estimated Cost
Because : you can't spend more than
you have

20. Typically...
Budget = Estimated Cost + Buffer
Buffer accounts for the unexpected

21. OK! I get it...
For a project to be feasible:
Budget > Estimated Cost
For a project to be a success:
Budget > Actual Cost

22. So how does Celoxis help?

23. With Celoxis...

24. 1. Estimated Cost is automatically
calculated...

25. ... so you can define a budget
OR
... validate your allocated budget

26. 2. You are alerted whenever
Estimated Cost > Budget...

27. ... so you don't have to check the
budget every time you change the
project plan

28. 3. You are alerted when
Projected Actual Cost > Budget

29. ...so you know beforehand that most
likely cost is going to exceed the
budget.

30. Now let's see how it's done...

31. How does Celoxis calculate the
Estimated Cost?

32. Estimated Cost of a Project
=
Sum : Estimated Cost of its Tasks
Simple!

33. Estimated Cost of a Task
=
Estimated Resource Cost
+
Estimated Material Costs
+
Fixed Cost

34. Example
Task: Add fertilizer to the garden
Est. Resource Cost = 2 hrs (effort) x $20 (Gardner's rate) = $40
Est. Material Cost = 10 lbs (quantity) x $5 (fertilizer cost) = $50
Fixed Cost = Gardner's visit fee = $75
Total Estimated Cost = $40 + $50 + $75 = $165

35. Estimated Resource Cost of a Task
=
Sum :
Allocated Hours
x
Resource Cost Rate
for all its assignees

36. In case of Employees...
Resource Cost Rate
=
Resource Annual Wages
--divided by--
Annual Working Hours

37. Task Est. Resource Cost Example
If ...
Resources = Joe[10h], Mary[20h]
and...
Cost Rates = Joe @ 20/hr, Mary @ 50/hr
then...
Est Resource Cost = 10x20 + 20x50 = $1200

38. Recollect...
Estimated Cost of a Project
=
Sum : Estimated Cost of its Tasks

39. Once you have the Estimated Cost,
set the project budget

40. Now let's see how "Actual Cost" is
calculated

41. Project Actual Cost
=
Sum : Actual Cost of all its Tasks

42. Task Actual Cost
=
Sum : Time Entry Cost
+
Sum : Expense Cost
+
Prorated Fixed Cost
Only costable & approved time and expenses are
considered

43. Time Entry Cost
=
Hours Filled
x
Resource Cost Rate

44. Now we know...
How Actual Cost is calculated

45. Now let's see how Celoxis calculates
the "Projected Cost"

46. Projected Cost is the cost that would
be incurred if cash will continue to be
"burned" at the same rate as today.

47. If project is 50% complete and has
incurred a cost of $2000
the Projected Cost will be....

48. $4000

49. OK. But why is the "Projected Cost"
important?

50. It serves as an "Early Warning
System"
You know beforehand that you may
exceed your budget
Celoxis shows the budget status in
amber color

51. Conclusion
We have seen
●What is budget and how Celoxis helps in
defining it.
●What are estimated, actual & projected costs
and how Celoxis calculates them.
●The benefits of budgeting and costing in Celoxis