The Prospective Financial Performance of the Products of the Project - Case Study Example

Project management metrics Project management metrics All aspects of any given project have to function effectively and efficiently if the project is to succeed. The project cost management encompasses processes that influence estimating, planning, budgeting, funding, financing, controlling and managing costs. These aspects help the project to be completed with the allocated budget. Some of the aspects involved in managing the costs of a project are carrying out estimates of costs, managing the plan cost, determination of a budget and controlling costs. These aspects play a pivotal role in enhancing that the project is running the way it ought to at the cost that was budgeted for it (Ramakrishna, 2010). For this management to work out, effective measuring tools need to be put in place. This implies that tracking the project’s progress as the deadline nears so as to determine how the project is close to becoming finished on budget and on time is very important. The key to completing the project on budget and on time is starting out the exact way and stay on track in the entire project. Once the project commences with challenging schedules, if they tend to fall behind even by very little, the rest of the project will be spent trying to catch up. Some of the projects tend to have an inbuilt self-correcting process. If the project seems to be falling behind, the process identifies it and deals with it immediately. The best project managers discover problems early enough and find a solution immediately. Progress measurement entails various tools used in identifying problems when they at early stages when the time to catch up is still available. It is hence evident that progress measurement is the key to the determination whether the project will be finished on time and budget (Ramakrishna, 2010). This is because it helps in determining problems in the project that can deter the project’s progress thus consuming cash and time. Project cost management The project cost management needs to consider the requirements of the stakeholder when it comes to cost management. Different stakeholders measure the project costs in various ways and at different times. For instance, the acquired item’s cost might be measured when the acquisition decision is committed. This means that a particular order gets placed, the item gets delivered, and the actual cost incurred is recorded for the accounting purposes of the project. Primarily, the cost management is concerned with the cost of all the resources required for the completion of the project activities. The project cost management need to consider the project decisions’ effect on the succeeding recurring cost of using, supporting and maintaining the product (Project Management Institute, 2013). In various organizations analyzing and predicting the prospective financial performance of the products of the project tend to be done outside the project. When analyzing and predicting the financial performance, the project cost management might be forced to address extra processes as well as various general financial management systems. These systems include return on investment, investment payback analysis and return on investment. All these aspects help in determine how the project is progressing. This helps in determining whether the project will be able to be completed at the right time and with the budget allocated to it (Ramakrishna, 2010). Some processes help in analyzing these aspects. Plan cost management is one of the processes of determining the project’s progress. It can be defined as the process which deals with the establishment of procedures, policies, and documentation. These three aspects play a pivotal role managing, planning, controlling and expending project costs. This process is beneficial in that it offers direction and guidance on the manner in which project costs will be managed in the entire project. The project facilitators will follow these guidelines so as to finish the project on time and on budget (Project Management Institute, 2013). Costs estimation is the other process. It entails developing an approximation of monetary resources required for the project completion. This is a very crucial process since it helps in determination of costs required in completing the project. It utilizes techniques such as expert judgments, bottom-up estimating, parametric estimating, Analogous Estimating and three-point estimating. This is to ensure that the cost estimation will be efficient as possible. Budget determination is the other process used. It is used in aggregating the costs estimated for individual activities so as to come up with an authorized cost baseline (Ramakrishna, 2010). The chief advantage of this process is that it helps in determining cost baseline against which the project performance can be controlled and monitored. This is a very crucial stage in that it determines whether the budget allocated will be enough or not. Cost control is another process that is very crucial in the cost management of any given project. It monitors the project’s status thus updating the project costs and changes management to cost baseline. The key advantage of cost control process is that it offers the means of recognizing variance from the plan (Project Management Institute, 2013). This helps in taking corrective measures thus minimizing risk. When measures that will enhance cost control are taken, the project will be able to be kept within recommendable limits such that the budget allocated will be sufficient. Measuring progress Measuring progress and cost management work hand in hand. Measuring progress is determined by the project’s part completed and the remaining part of the project. When assessing these two aspects, the assessor will have to consider the cost incurred and the remaining cash as per the budget that was allocated to that project. By so doing, he will be able to determine whether the project is on the track or not. If it is they enhance measures that will maintain it on the track. If it is out of the track measures such as cost control will help the project to operate within the precincts of the budget that was allocated. Progress measurements entail tools that identify problems when they are minor. In other words, it solves problems when the time is still available to catch up (Verzuh, 2008). Schedule progress and cost schedule are the main focus of progress measurement. Measuring schedule performance implies that every work package in a plan is a progress’s measurable unit. Every project has a start as well as finish dates. When it comes to progress measuring, the project manager needs to make use of the 0-50-100 rule. This rule entails that a project manager need to be always suspicious of the package status of work reported as work progresses. As per this rule 0 percent indicates that the task is yet to begin, 50 percent indicates the project has commenced but it is unfinished, and 100 percent implies that task is complete. With the use of this rule, the project needs to be progressive such that no task of the project needs to be 50 percent twice. In measuring the project’s progress, the project’s managers need to take the completion criteria seriously (Ramakrishna, 2010). Every task of a project needs to have a completion schedule if the project is to be completed on time. Irrespective of the uniqueness and the number of the tasks encompassed in a project there should be a way assessing the progress and determine the completion schedule. Measuring the cost performance is an essential aspect. Accurate measurement of cost is crucial when the project is in progress since costs tend to measure productivity. Every work package in the project has its cost estimates for equipment, labor and materials (Verzuh, 2008). It is hence essential to capture the exact cost so that the project can be profitable. Earned value reporting is also very essential in measuring progress. It compares the cash flow and the actual cash flow. Earned value reporting, helps to achieve the true picture of cost performance by comparing the actual and planned costs of the complete tasks. For the earned value work to work the work breakdown structure need to be put in place. Every task according to work breakdown structure needs to have a definite start and finish dates. The task also needs to produce tangible outcome whose completion can be assessed objectively. Costs also need to be assigned to a task. Cost and schedule baselines are very essential in measuring progress. A baseline can be defined as a comparison point. Cost and schedule baselines tend to represent the initial project plan as the stakeholders approved it. The project should not ideally vary from the initial plan. Keeping the baseline cost as well as schedule goals visible is a way of holding the focus on the initial goals even when changes take place. Many projects stay in darkness as per the status until their deadline is at hand, and they realize there is no hope of finishing the project on time and on budget (Verzuh, 2008). This implies that measuring progress is the key to finishing the project on time and on budget. References Project Management Institute, (2013). A Guide to the Project Management Body of Knowledge. New York: Project Management Institute, Inc. Ramakrishna, K. (2010). The essentials of project management. New Delhi: PHI Learning. Verzuh, E. (2008). The fast forward MBA in Project Management. Hoboken, New Jersey: John Wiley & Sons, Inc. Read More