• Project Executing Process - Kick-off Meeting

  October 10, 2008

  
  

• No Creation of Best Practices - Project Management Mistake # 15

  October 10, 2008

  
  

• Cutting Project Costs and Exceeding Expectations – A Simple Seven Step Solution

  October 10, 2008

  
  

• Tips For Passing the PMP Certification Exam

  October 10, 2008

  
  

• Procurement Management in Project Management - Source Selection

  October 9, 2008

  
  

• The Holy Grail of Project Management Process and Methodology

  October 9, 2008

  
  

• Reviews in Project Management are Required

  October 9, 2008

  
  

• The Phased Approach to Project Management Implementation

  October 9, 2008

  
  

• Specific Responsibilities of the Project Manager

  October 9, 2008

  
  

• Risk Management Planning

  October 8, 2008

  
  

Costing and Budgeting - Costing

June 27, 2008 | Author: admin | Filed under: Cost Management

Costing and Budgeting - Costing (#34 in the Hut A Project Management Primer)
By Nick Jenkins

At a basic level the process of costing is reasonably simple. You draw up a list of all your possible expenditure and put a numerical value against each item; the total therefore represents the tangible cost of your project. You may also however need to consider “intangible” items.

Tangible costs

• Capital Expenditure – any large asset of the project which is purchased outright. This usually includes plant, hardware, software and sometimes buildings although these can be accounted for in a number of ways.
• Lease costs – some assets are not purchased outright but are leased to spread the cost over the life of the project. These should be accounted for separately to capital expenditure since the project or company does not own these assets.
• Staff costs – all costs for staff must be accounted for and this includes (but is not limited to): salary and pension (superannuation) costs; insurance costs; recruitment costs; anything which can be tied directly to employing, training and retaining staff.
• Professional services – all large-scale projects require the input of one or more professional groups such as lawyers or accountants. These are normally accounted for separately since a close watch needs to be kept upon expenditure in this area. Without scrutiny the costs of a consultant engineer, accountant or lawyer can quickly dwarf other costs.
• Supplies and consumables – regular expenditure on supplies is often best covered by a single item in your budget under which these figures are accrued. They are related to overhead below.
• One-off costs – one-off costs apply to expenditure which is not related to any of the above categories but occurs on an irregular basis. Staff training might be an example. While it might be appropriate to list this under staff costs you might wish to track it independently as an irregular cost. The choice is yours but the principles of prudence and consistency apply.
• Overheads – sometime called indirect costs, these are costs which are not directly attributable to any of the above categories but never-the-less impact upon your budget. For example it may not be appropriate to reflect the phone bill for your project in staff costs, yet this still has to be paid and accounted for. Costing for overheads is usually done as a rough percentage of one of the other factors such as “staff costs”.

Intangible costs

It has become fashionable to account for “intangible” assets on the balance sheets of companies and possibly also projects. The argument goes like this: some contributions to a project are extremely valuable but cannot necessarily have a tangible value associated with them. Should you then account for them in the budget or costing? The “prudence” principle says yes but practicality says “no”. If you are delving this murky area of accountancy you should seek professional help and advice.

Typical things you might place in the budget under intangibles are “goodwill” and “intellectual property”. Personnel-related figures are a frequent source of intangible assets and so you might find things like “management team”, “relationships” and “contacts” on an intangibles balance sheet.

Next in the Hut A Project Management Primer:

Costing and Budgeting - Budgeting

Previously in the Hut A Project Management Primer:

Costing and Budgeting - Introduction

Nick Jenkins is an IT manager with 10 years experience in software development, project management and software testing. He’s worked in various fields of IT development in Australia, Britain and the USA and occasionally he learned something along the way. Now he lives on the banks of the Swan River in Perth, Western Australia, and he publishes the odd guide to help aspiring IT professionals. Nick’s website can be found at www.nickjenkins.net.

Related Articles

• Costing and Budgeting - Introduction
• Costing and Budgeting - Budgeting
• What Is Budgeting?
• What Is Cost Budgeting?
• Creating The Project Scope - Cost Budgeting

This entry was posted on Friday, June 27th, 2008 and is filed under Cost Management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

2 people have left comments

feel free to leave a comment

Comment Guidelines: Basic XHTML is allowed (a href, strong, em, code). All line breaks and paragraphs are automatically generated. Off-topic or inappropriate comments will be edited or deleted. Email addresses will never be published. Keep it PG-13 people!

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>

All fields marked with " * " are required.

Name: *
Email (will never be displayed): *
URL:
Your comments: *
Remember my information for the next time I visit.

• Agile Project Management
• Certification
  •  >> CAPM
  •  >> ITIL
  •  >> PMP
• Change Management
• Communications Management
  •  >> Communications Planning
  •  >> Information Distribution
  •  >> Performance Reporting
  •  >> Project Closure
• Computer Based Information Systems
  •  >> Latest Trends
  •  >> Project Collaboration
• Concepts
  •  >> Project Lifecycle Phases
  •  >> Project Stakeholder Mgmt
  •  >> Role of the Project Manager
• Corporate Transformation
• Cost Management
  •  >> Cost Estimating
  •  >> Economic Evaluation
• Critical Chain Project Management
• Delegation
• History
• HR Management
  •  >> Organizational Structures
  •  >> Team Building
• Implementing Project Management
  •  >> PM Implementation Plan
• Integration Management
  •  >> Change Control
  •  >> Project Management Framework
  •  >> Project Plan Development
• Lessons Learned
• Management
• Miscellaneous
• People Issues
  •  >> Conflict Management
  •  >> Leadership
  •  >> Motivation
• PMBOK
• PRINCE2
• Procurement Management
  •  >> Contract Administration & Close-out
  •  >> Procurement Plannning
  •  >> Solicitation & Source Selection
• Program Management
• Project Management Advantages
• Project Management Best Practices
• Project Management Charts
• Project Management Definitions
• Project Management Ethics
• Project Management for Beginners
• Project Management Musings
• Project Management Office
• Project Management Proposals
• Project Management Templates
• Project Portfolio Management
• Project Workforce Management
• Quality Management
  •  >> Principles
  •  >> Techniques
• Requirements Management
• Risk Management
  •  >> Risk Identification
  •  >> Risk Quantification & Analysis
  •  >> Risk Response & Control
• Scheduling
  •  >> Normal and Crash Costs
  •  >> Project Plan Refinement
  •  >> Resource Constrained Projects
  •  >> Resource Leveling
• Scope Management
  •  >> Process of Change Control
  •  >> Project Scope Management
  •  >> Scope Change Control
• SCRUM
• Soft Management
• Time Management
  •  >> Activity Definition
  •  >> Activity Duration Estimate
  •  >> Activity Sequencing
  •  >> Critical Path
  •  >> Network Planning
  •  >> Project Milestones
• Training
• Uncategorized