Cost Management Plan – A better understanding of it!
Introduction:
What is a cost management plan? Sometimes also known as; spend management, cost transparency, and cost accounting.
Typically made up of four simple elements:
- Resource Planning
- Cost Estimation
- Budgeting, and
- Cost Control.
It is strongly recommended to use a project planning software to assist in the process of creating a cost management plan, as there will be many tasks, costs, and resources to track.
1. Resource Planning
Project managers will typically use a work breakdown structure to show the project and its deliverables in a hierarchy (i.e. from most important to least). This information will help project managers to understand where the bulk of the costs will funnel towards, and which components of the project will require the least expenditure.
2. Cost Estimation
Cost estimation is an iterative process – meaning that it is designed to change as the project changes. This stage uses many different estimation techniques that are determined by conceptual goals, historical knowledge, expert judgement, determinative techniques, or using a component-by-component basis.
3. Budgeting
Project budget will enable the project to truly succeed. Budgets are formed and approved after the estimation phase, and are typically released in a series of phases, depending on the project progress. This will help the project reach each budgetary phase, rather than trying to match an overall project budget.
4. Cost Control
Cost control is simple – it will help provide a benchmark throughout the project process. They are used as a method to challenge reasons for changes in cost. This will help to correct should a cost increase, and keep the project cost under control. Ultimately, cost management plan will help to plan for the project cost, and manage project cost throughout the project’s life cycle.
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