Financials viewlet

From a financial perspective, you would always need to plan the budgeted costs and revenues and track the actual costs and revenues. The financials viewlet would help you to track the estimated cost against the actual cost. For example, as a project manager for your website design services project, you want to view the actual cost spent on procuring licenses for a software application for the first two quarters of this year against the estimated cost. You will use this viewlet to do the same. <need a better, appropriate example>
The financials viewlet, you will be able to view: Additionally, you can track other project expenses, for example, travel and meeting expenses. You will configure the additional expenses in this viewlet. These additional expenses are created and associated as charge code in the application admin area and they are flagged as account heads.

For example, a web design project needs 10 team members to complete a project. The hourly rate for each team member is USD 10 and the project duration is 2 weeks. However, the team took additional 2 days to complete the project. The estimated cost, actual cost, and the cost impact are reflected in the Financials viewlet.

Forecast

Forecast includes estimation of prospective financial expenses for a project. The calculation of forecast cost is done on a project level. As a project manager, when you assign the resources to a project, you provide the estimated time, cost, and selling rate for the resources. The planned effort for the resources is rolled up to the project level.

The financials viewlet forecasts both cost and revenue. It involves planned effort of the resources or profiles assigned to the project and their rates, cost and selling.

Estimated cost vs actual cost

Estimated cost is the budgeted cost associated with each task within a project. Actual cost is the real cost associated with each task within a project. It is the cost incurred in carrying out a task assignment. Actual cost is charged to the project budget. The calculation of estimated cost is done on a task assignment level. As a project manager when you assign the resource to a task, you provide the estimated time to accomplish the task. Querying for all the task assignments within a project, this information is rolled up to a project-level. The team member enters the actual hours worked on the assigned task in the timesheet. The actual hours worked on each task on a given rate is then rolled up to the project-level.

The estimated cost includes both cost and revenue. It involves planned effort of the resources or profiles assigned to the task and their rates, cost and selling.

The actual cost includes both cost and revenue. It involves actual effort of the resources or profiles assigned to the project and their rates, cost and selling.

Cost variances

Cost variance is the difference between what is estimated and what is actually accomplished on a project and it measures the cost performance on a project. Cost variance is a key tool in project management and requires logical approach. As a project manager, you need to identify the cost variance parameters and define the thresholds.

Cost variance is further broken down to forecast and estimated cost. The equation to determine the cost variance is the difference between the forecast and estimated cost and the actual cost.

It is considered to be an ideal business condition when the resulting value for the cost variance is a positive value (any number greater than zero). If the resulting value for the cost variance is a negative value (any number less than zero), then it is considered to be an unfavorable condition.
Important: Minimize the actual costs to the best possible way to maintain a favorable cost variance.
Related tasks
Adding charge codes to a project
Removing charge codes from a project
Tracking project financials
Related reference
Project financial elements

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