Cost control Monitoring & Accounting

Cost Control Problem

Sucess of project depends on its ability to control cost and maximize profit Through budgetory control
The actual performance can be compared with the budgeted performance The discrepancy between the planned and actual can be found out & suitable remedial actions can be taken

 Budgetary control is defined by the Institute of Cost and Management Accountants (CIMA) as: "The establishment of budgets relating the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with budgeted results, either to secure by individual action the objective of that policy, or to provide a basis for its revision".

Budgetary control methods

a) Budget: A formal statement of the financial resources set aside for carrying out specific activities in a given period of time. It helps to co-ordinate the activities of the organisation. b) Budgetary control: A control technique whereby actual results are compared with budgets. Any differences (variances) are made the responsibility of key individuals who can either exercise control action or revise the original budgets.

Project Budget
Fragman Definition Comprehensive and co-ordinated plan expressed in financial terms for the operations and resources of an enterprise for some period in the future. ICMA London. A financial or auantitative statement prepared and approved prior to a defined period of time of the policy to be pursued during that period for the purpose of attaining a given objective

Budgeting Advantages
Compels management to think about the future - the most important feature of a budgetary planning and control system Forces management to look ahead - to set out detailed plans to achieve the targets for each department, operation and (ideally) each manager, to anticipate and give the organisation purpose and direction. Promotes coordination and communication. Provides a basis for performance appraisal (variance analysis). A budget - a yardstick against which actual performance is measured and assessed. Control is provided by comparisons of actual results against budget plan. Departures from budget can then be investigated and the reasons for the differences can be divided into controllable and non-controllable factors.

 Improves the allocation of scarce resources. Motivates employees - participating in the setting of budgets. The probability of back passing - minimized or avoided Helps to develop a team work

Budgetary Control
Is a system of planning and accounting of control through the use of budget Cost inflation/escalation Inflation increase in the prices of goods & services & thus reduces the purchasing power of money Escalation difference between the origin & the latest estimate of the final cost of the project Unforeseen costs not anticipated during the time of preparation of original estimate.

Relating cost & schedule Information

Budget cost of work schedule(BCWS) which re