课程: Project Management Foundations: Budgets

Budget forecasting

课程: Project Management Foundations: Budgets

Budget forecasting

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- The earned value approach for tracking project status is excellent for forecasting, especially when your project's in the execution phase. By monitoring the status against your plan, you can estimate the money you'll spend when the project is complete. You can also forecast the funds needed from your current point in time to the project conclusion. The amount of money spent when the project is complete is called estimate at completion or EAC. The money needed to get you from your current point in the project until the end is called the estimate to complete or ETC. Let's look at how to calculate these forecast figures. But first, a warning, a bit of math is coming up. We'll step through it slowly and show the formulas on screen. We first need to determine the cost performance index or CPI to produce these forecasts. The CPI equals the earned value, the value of the work you've completed, divided by the actual cost, what you spent to complete that work. As a formula, this is CPI equals EV over AC. CPI indicates what you expected to spend versus what you've actually spent on the project. We use that knowledge for forecasting costs in the future. Now, let's calculate the estimate at completion or EAC. Take the original budget you estimated to complete the project and divide it by the CPI. Let's say you initially estimated it would cost 100,000 euros to complete your project and your CPI was 1.2. The result would be 100,000 divided by 1.2, which equals 83,333 euros. You'd be doing quite well in this case. However, if your CPI was 0.85, the calculation would be 100,000 divided by 0.85, which equals 117,647 euros. This shows you'd be over your original estimate to complete the project. Okay, let's calculate the estimate to complete. It's similar to calculating EAC, but with one additional step. For ETC, you take your original project budget estimate, subtract the earned value, and divide it by your CPI. Here are examples. If your earned value was 30,000 euros, your original budget was 100,000 euros, and your CPI was 1.2, the calculation would be 100,000 minus 30,000, which equals 70,000. You then divide 70,000 by 1.2, giving you 58,333. You need that much money to complete the project. If your CPI was 0.85, you would still subtract 30,000 from your original estimate 100,000, equaling 70,000. Dividing that by 0.85 yields 82,353, which is the forecast of the money you need from here forward to complete the project. I've included examples of these forecasts in chart form in the Exercise Files. With these formulas, you can adjust your forecasts as your project progresses. Your forecast results may change as the project progresses. Make sure you understand any variances from your plan so you can explain your forecast changes.

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