Did you know Tom-Mates, to run a project requires funds or costs. Funds can be obtained from anywhere, but if funds are not regulated and calculated properly it can hinder the work of the project. Cost or funds are one of the most important resources in the development of a project. Therefore, project cost management is an important management in the development of the project itself.

Definition of Cost

Cost is all the resources that must be sacrificed to achieve a specific goal or to get something in return. Costs are generally measured in financial units such as dollars, rupiah, and so on.

What is Project Cost Management?

Project cost management is an activity to estimate, allocate and control the costs of a project. This results in an approved cost monitoring budget and provides a basis for decisions to control for additional or unexpected costs. This cost factor can determine how much costs will be incurred for a project.

4 Stages of Determining Project Management Costs

1. Resource Planning

In the initial phase, the resources needed to complete project activities need to be determined. Time, materials, human resources, equipment, and so on. Once all is known, you can do a cost estimate.

2. Estimated costs

After knowing what needs are needed, you can immediately determine the estimated cost. You can use an overview of the costs required from previous projects if there are similarities. Uncertainties remaining in the forecast that are likely to result in additional costs can be covered by the cost of the order (e.g. using escalation and contingencies).

3. Budget

A cost estimate determines the cost of each work package or activity, whereas a budget allocates costs over the time period when costs will be incurred. The cost baseline is the approved time-phased budget for use.

4. Cost Control

Cost control is concerned with measuring the variance from the cost baseline and taking effective actions to achieve minimum costs. Procedures are in place to monitor expenditures and performance against project progress. When actual cost information is available it will be important information for cost control.