budgeting & cost estimation

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Budgeting & Cost Estimation : 

Being Presented By: Mohammad Saber Yaqin Mohammad Naser Kotobi Mohammad Idriss Irfan Budgeting & Cost Estimation

Contents : 

Contents Cost Management Cost Estimation Ingredients Problems with the technique Mistakes made in Cost Estimation Tips Budgeting Top-Down and Bottom-Up Methods Conclusion References

Cost Management : 

Cost Management Management of the processes involved in planning, estimating, and controlling costs so that the project can be completed within the approved budget. Cost Estimation Budgeting Cost Controlling

Cost Estimation : 

Cost Estimation Organizing the project into work phases Estimation of costs of tasks of WBS

Ingredients of Cost Estimation : 

Ingredients of Cost Estimation Resource required for the project. Overheads in the technology. Indirect overheads. Profitability from the project. Total expenses

Problems with Cost Estimation : 

Problems with Cost Estimation Low initial estimates Unexpected technical difficulties Lack of definition Specification changes External factors

Mistakes in Cost Estimation : 

Mistakes in Cost Estimation Not properly understanding the scope of the project. Trying to provide detailed estimates before project management requirements. Relying on verbal means of report only Not including any contingency in the budget

Tips of Cost Estimation : 

Tips of Cost Estimation Budget set aside by Finance. Expert and talented brains. Breakdown in terms of contract, external or permanent resources. Never book any resource 100% of the time.

Tips of Cost Estimation : 

Tips of Cost Estimation Always ask what management time needs to be included in your project cost estimation. Contingency approach to the Budget. All ancillary tasks should be kept in mind. Understanding the culture of the organization.

Budgeting : 

Budgeting Allotment of the budget for each work package. Distribution of TBC over duration of time How would be the resources spent. Cost estimates, work break down structure and project schedules are interrelated concepts.

Bottom-Up (Cost Aggregation) : 

Bottom-Up (Cost Aggregation) Cost of individual units Resources required for individual units Summation of funding of all individual units Addition of funding for every project

Drawbacks : 

Drawbacks Request for more funds Rise up to distrust between members & Top Management Complicated Method Small mistakes can become monster challenges

Benefits : 

Benefits Accuracy Involvement of all members Individual Responsibility & Accountability Specialization in members Easy calculation (does not require expert knowledge)

Top-Down Method : 

Top-Down Method Budget of upper level management Project base budgeting Higher level tasks Medium level tasks Last unit

Advantages : 

Advantages Beneficial in financially worse situations Little cases of wastage of resources Easy & Simple calculation from top No need to identify every small task

Drawbacks : 

Drawbacks Inaccuracy Requires expert knowledge at top level Senior managers may use their power Throwing responsibility of effective use of the funds to next line

Conclusion : 

Conclusion Without proper planning of cost management, deliverables may happen, but chances of over shooting the budget always remain. It is very critical that we need to keep a strict vigil on various processes involved in estimation, budgeting and control in a project so as to ensure its completion within the allotted time frames and budget.

References : 

References http://www.businessknowledgesource.com http://www.heberts.net/budgeting-project-tasks/ http://www.management-hub.com/project-estimation-methods.html http://www.my-project-management-expert.com Fundamentals of Project Management by James P. Lewis