Guide to Project Budgeting and Scheduling - Assignment Example

Schedule, Budget and Controls Schedule, Budget and Controls Scheduling and budgeting is a very important in implementation a strategy for an organization. In addition, control is paramount for the success of any schedule or budget. In this essay, I determine the tools that would work best for me in developing your schedule and budget. I also identify the simple methods for monitoring and controlling the schedule and budget. Finally, I identify the specific tools that you are proposing to use for this project. Tools to be used in Schedule and Budget Development Given that preparation of a schedule and a budget involves several actions, a budget calendar can be used as a tool for the development of a schedule and a budget. A budget calendar is a form of plan that is used to enhance timely and comprehensive implementation of the numerous actions of the budget. Formulation of a schedule for the procedures and steps that will be followed in each phase of the process of developing the budget is planned for in the budget calendar (Spofford & Savov, 1999). In addition, the participants of budget development, as well as, their duties are defined in the budget calendar. The budget calendar also keeps the actions that are required by law on track (Spofford & Savov, 1999). It is in the budget calendar that decisions of goals based on the organization’s long term vision and company needs are made. Also, decision on the long term goals, based on revenue allocation and evaluation will be made using the budget calendar. Analysis and review of the budget, adoption of the budget, as well as execution of the budget are carried out through the budget calendar (Spofford & Savov, 1999). Secondly, a revenue forecasting model can be used as a tool for schedule and budget development. This will involve cost and investment estimations, applicable discount rate to account for risk and revenue forecasts, which should be made so as to determine the potential value of new products (McIntyre, 2013). Using the revenue forecasting model, the current market share can be obtained by ensuring that company’s customer base is multiplied by total penetration, multiplied by the share of penetration of the product, multiplied by the unit price of the product, multiplied by the number of units that will is sold per the year (McIntyre, 2013). Given that performance budgeting is the most ideal type budgeting and scheduling for this project, which focuses on actual or projected results, budget decisions will be shifted from inputs to outcomes. Analytic tools can also be used to develop both the schedule and the budget because such tools empower those responsible for budget preparation by facilitating full scope for judgment and subjectivity to them (Schick, 2007). Finally, Activity Based Budgeting can be used in schedule and budget development. This involves activities within the organization. Therefore, budgeting will be based on the capacity management concepts. To avoid failure, the underlying operational model of the organization will be linked to financial requirements of the organization. This means that a feasible operational budget will be formulated before a financial budget is generated (Hansen, Otley, & Stede, 2003). Activity based concepts will be used to convert demand estimates for products into activity requirements. This process of conversion of demand estimates for products into activity requirements is carried out by making use of activity consumption rates (Hansen, Otley, & Stede, 2003). Further, using resource consumption rates, activity requirements are converted into resource requirements. Then, a financial plan is developed, based on the operational plan. Financial balance should be attained by ensuring that predetermined financial targets are met (Hansen, Otley, & Stede, 2003). Tools to be used for the Monitoring and Controlling of the Schedule and Budget Among the tools that can be used in monitoring and controlling the schedule and budget is the Earned Value Analysis. Earned Value Analysis can be used to monitor and control the schedule and budget by carrying a comparison between the status of project completion and the budgeted expenditure (Pinheiro, 2010). The elements of Earned Value Analysis include a list of tasks, projected dates for start and end for each task, labor expenditure as estimated, costs that are actually incurred for each task and the extent of completion of tasks (Pinheiro, 2010). Earned Value Analysis will provide the budgeted cost of a task, variance and can be used as a warning on poor performance so that improvements can be made (Pinheiro, 2010). In addition, the Cost Performance Baseline can be used in measuring, monitoring and controlling the schedule and budget (Tom & Paul, 2013). This will involve the use of the costs that the project has cost to measure or monitor the performance of the schedule and budget. Also, through the Work Performance Measurements, cost variance, schedule variance and other values are calculated as incurred during the period for which the schedule or budget is in operation to provide information for control (Tom & Paul, 2013). It is through performance targets that have been set, performance is evaluated so that it can be controlled. Finally, budgeting-accounting-audit can be used to monitor and control the schedule and budget. This is because audit allows for decisions pertaining to implementation, monitoring, control and feedback evaluation of the schedule and budget to be made (Pollitt, 2001). Specific Tools proposed for use in this Project It is proposed that this project will use analytic tools to develop the schedule and the budget. This is because analytic tools allow for the preparation of a budget while exercising full responsibility in judgment and subjective decision making. For instance, the project manager will decide the elements to be included or left out in project scheduling and budgeting. Secondly, it is proposed that the project should use Activity Based Budgeting in schedule and budget development. This is because activities within the organization can be linked to financial performance. This allows scheduling and budgeting to be based on the capacity management concepts of the project manager. This is because performance budgeting is the most ideal type budgeting and scheduling for this project, that is set to focus on actual or projected results. In addition, the operational activities of an organization are linked to budget decisions, while inputs will be linked to outcomes. Operations will be used to formulate a feasible operational budget before generation of a financial budget. References Hansen, S. C., Otley, D. T., & Stede, W. A. (2003). Practice Developments in Budgeting: An Overview and Research Perspective. Journal of Management Accounting Research , Vol. 15, pp. 95-116. McIntyre, L. (2013). Forecasting New Product Revenues: Revenue Forecasting Model. L.E.K. Consulting Executive Insights, Vol. 4, No. 2, pp.1-8. Pinheiro, A. B. (2010). How Do Managers Control Technology-Intensive Work? Journal of Technology Management & Innovation, Vol. 5, No. 2, pp. 1-10 . Pollitt, C. (2001). Integrating Financial Management and Performance Management. OECD Journal on Budgeting , pp. 7-37. Schick, A. (2007). Performance Budgeting and Accrual: Budgeting: Decision Rule. OECD Journal on Budgeting, Volume 7, No. 2, pp. 109-138. Spofford, T., & Savov, E. (1999, April). Budget Preparation Manual for Bulgaria. Retrieved from http://www.frp2.org/english/Portals/0/Library/Budgeting/Budget%20Preparation%20Manual%20for%20Bulgaria%20%20-%20Full%20Text.pdf Tom, A. F., & Paul, S. (2013). Project Monitoring ad Control using Primavera. International Journal of Innovative Research in Science, Engineering and Technology, Vol. 2, No. 3, pp. 762-771. Read More