Cost Management (or Cost Control) is the process during which the actual costs are tracked against estimates and if needed corrective actions are taken to keep costs within budget.
During the Planning phase, a baseline was established for the Cost Schedule (refer to 7.4.3.2). This baseline will be used as a starting point against which financial progress will be measured. In this way the Project Manager will be able to monitor cost variances and their impact on schedules and resources, as well as to take the necessary actions to ensure that the project stays within budget.
The steps that are undertaken to control Costs are the following:
| ● | Record actual costs (or expenses) based on resource and schedule progress, as well as on current cost rates. |
| ● | Update the Cost Schedule on a regular basis to ensure that the financial progress is on track. |
| ● | Identify and resolve cost problems to ensure that the project stays within budget. |
Figure 7-18: Steps to be followed for managing costs
As it has been already mentioned (refer to 7.4.3), there are various software packages in the market (e.g. MS Project, Primavera Project Planner) that can be used for developing, monitoring and control a cost schedule. However, for the purposes of this Guide the simple tool presented in Annex 7-1/ Sheets “Cost Schedule” and “Costs vs. Activities” can be used also for tracking costs during the Execution & Control phase.
The following paragraphs describe analytically the steps to be followed for an effective cost management.