a cost management plan is a document that helps you map and control a budget. cost management plans keep all project costs in one place, including direct and indirect costs. a cost management plan example could be the budget for a home improvement project. for effective cost management in project management, a project manager needs to ensure they have all the required information to create a detailed plan.
a cost management plan is important because it creates a detailed outline of your project budget. if you don’t estimate costs accurately, allocate sufficient resources where they are needed, and regularly monitor spending, you run the risk of budget overrun. a project cost management plan can also be highly beneficial for cutting unnecessary costs. according to harvard business review, “to cut costs effectively, companies must connect costs to their strategy.” a cost management plan will help project managers to assess cost priorities and save money.
mismanaging project costs is the single fastest way to cause project failure. the project cost management plan is a component of the overall project management plan. funding requirements often require this type of analysis to determine when the funds will be released. in order to be approved by the applicable authorities, the amount that the project will cost is usually a major variable. the wbs is simply a subdivision of the project into tasks. the actual cost of the previous project is revised and adjusted to account for the different variables present at the new project.
often, these variables are published in commercial sources or well known to the organization. the risk register is consulted to determine what the major risks to the budget are, and how much of a potential contingency might be allocated to it. the estimator must balance the risk of losing the project with the risk of getting the project but losing money. for example, in a bridge building project the potential rise in streamflow could represent a good reason to increase estimates. many organizations track the cost escalation on past projects and allocate this to each future project as a management reserve. these cost accounts are correlated to the task list, that is, the work breakdown structure (wbs). to create a strong control on the project budget during project execution, the project manager uses earned value management.
the first process of this knowledge area is plan cost management process. in this process, how to determine budget, estimate costs and a cost management plan is a document that helps you map and control a budget. it enables project managers to estimate their costs, allocate resources to the the cost management plan should take into account the time value of money, return on investment, net present value, and payback period, if applicable. funding, .
plan cost management is the process that establishes the policies, procedures, and documentation for planning, managing, expending, and controlling project costs. the key benefit of this process is that it provides guidance and direction on how the project costs will be managed throughout the project. the plan cost management is a process in project management that establishes the different procedures, policies, and documentation needed to plan, manage, a cost management plan is a method of strategizing the planning and execution of a project’s budget. of course, this is done in order to while cost management is viewed as a continuous process, it helps to split the function into four steps: resource planning, estimation, budgeting and, .
When you try to get related information on plan cost management process, you may look for related areas. .