Tracking your project costs

Applies to
Microsoft Office Project 2003

How can you tell if your project is on budget? Through cost tracking in Project. Use Project to compare original cost estimates, actual costs, projected costs, and see the variances between costs at any time and at any level of detail.

What is the cost tracking process?

Where can I view cost information?

Can you give me an example of cost tracking?

What is the cost tracking process?

To best track costs, you should first create a budget (budget: The estimated cost of a project that you establish in Project with your baseline plan.) by entering pay rates (pay rate: Resource cost per hour. Project includes two types of pay rates: standard rates and overtime rates.), per-use (per-use cost: A set fee for the use of a resource that can be in place of, or in addition to, a variable. For work resources, a per-use cost accrues each time that the resource is used. For material resources, a per-use cost is accrued only once.) and fixed (fixed cost: A set cost for a task that remains constant regardless of the task duration or the work performed by a resource.) costs for tasks (task: An activity that has a beginning and an end. Project plans are made up of tasks.), resources (resources: The people, equipment, and material that are used to complete tasks in a project.), and if necessary, assignments (assignment: A specific resource that is assigned to a particular task.). Then, specify the estimated work (work: For tasks, the total labor required to complete a task. For assignments, the amount of work to which a resource is assigned. For resources, the total amount of work to which a resource is assigned for all tasks. Work is different from task duration.) or duration (duration: The total span of active working time that is required to complete a task. This is generally the amount of working time from the start to finish of a task, as defined by the project and resource calendar.) for tasks and assign resources to the tasks. Only when all of these steps are complete can Project calculate the total estimated costs for the project. You may then want to refine your estimates. When you're done, you save a baseline plan, thereby establishing a budget for the project.

After the project begins, you update task progress—the amount of work done on tasks or the percentage of the tasks that are complete. Project calculates costs for you based on task progress.

 Note   You can also choose to turn off automatic calculation of costs and enter actual costs (actual cost: The cost that has actually been incurred to date for a task, resource, or assignment. For example, if the only resource assigned to a task gets paid $20 per hour and has worked for two hours, the actual cost to date for the task is $40.) yourself, in addition to task progress.

By combining the actual costs of completed work with the estimated costs for remaining work (remaining work: The amount of work, in terms of a time unit such as hours or days, that is left to be completed on a task. This is calculated as follows: Remaining Work = Work - Actual Work.), Project calculates scheduled (scheduled or current cost: The latest cost of tasks, resources, assignments, and the entire project, which is displayed in the cost field as cost or total cost. It is kept up to date with cost adjustments that you make and with the project's progress.) (projected) costs. More importantly, it calculates the difference between the scheduled and baseline costs. It's this difference, or cost variance (CV: The difference between the budgeted cost of work performed [BCWP] on a task and the actual cost of work performed [ACWP]. If the CV is positive, the cost is currently under the budgeted amount; if the CV is negative, the task is currently over budget.), that tells you whether your project is on budget or not.

You can do simple cost tracking by viewing the actual and scheduled (projected) costs for tasks, resources, assignments, and the project.

If you've created a budget through a baseline, you can do more extensive tracking by comparing the actual and scheduled costs against the baseline costs.

To determine whether you're on budget or not, you can view the cost variances between scheduled costs and baseline costs. For example, if a task is budgeted to cost $50, but the task is half-way done and already costs $35, the scheduled cost is $60 (the $35 actual costs to date, plus the $25 expected costs for the remaining work on the task). The cost variance is $10 ($60 of actual cost minus the $50 of budget cost).

By monitoring cost variances regularly, you can take steps to ensure that your project stays close to its budget.

 Note   You can only view cost variances if you've entered initial costs and saved a baseline. For instance, if you didn't enter pay rates for a resource before you saved the baseline, you won't be able to view cost variances for that resource.

Where can I view cost information?

In Project, you can see costs for tasks, resources, and assignments. You can also see the project cost, which is generally based on these more detailed costs. You can view both total costs and timephased (timephased: Task, resource, or assignment information that is distributed over time. You can review timephased information in any available time period in the fields on the right side of the Task Usage and Resource Usage views.) costs, which are costs distributed over time.

There are many different ways to view cost information in Project:

You can see cost details in some views by selecting Costs from the Details item on the Format menu. You can also add specific cost fields to any sheet view by inserting a cost column. And you can display cost fields next to bars in the Gantt Chart by formatting the bars using Bar Styles from the Format menu.

Can you give me an example of cost tracking?

You can enter the task called "Test the program" into your Project plan and assign a contract tester to the task at $40 per hour (assume that the tester's pay is the only contribution to the task cost). You enter a duration of 10 days (at 8 hours per day), and then save a baseline.

At the end of 5 days, you determine that the task is half finished, and you mark the task in Project as 50 percent complete. On the Task Sheet view, you apply the Cost table and see the following:

  • In the Baseline field, Project displays the baseline cost of the task, $3,200, which it calculated by multiplying your original duration estimate of 10 days (or 80 hours) by the tester's standard rate of $40 per hour.
  • Because the task didn't incur any unplanned costs in the first 5 days, the Actual field accurately displays the actual cost incurred to date. In this case, actual work is calculated by the formula Actual Work * Standard Rate = Actual Cost, or 40 hours * $40 per hour = $1,600. (Overtime, per-use costs, and fixed costs are not included in this example, but can be included in an actual cost.)
  • The remaining cost is calculated by the formula Remaining Work * Standard Rate = Remaining Cost, or 40 hours * $40 per hour = $1,600.
  • In the Total Cost field, Project displays the scheduled cost, which it calculates according to the formula Actual Cost + Remaining Cost = Scheduled Cost, or $1,600 + $1,600 = $3,200. Because the scheduled cost equals the baseline cost, the Variance field displays a cost variance (CV) of $0, which means that the task is exactly on budget.