The Ultimate Guide to Project Cost Management with Templates

By Kate Eby | April 25, 2017

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Your organization’s projects are critical to its future. Sound cost management enables you to make optimal use of your resources (time, personnel, equipment, and materials), make data-driven decisions about projects and their risks, measure financial performance, and provide key metrics to senior management.   This definitive guide to project cost management includes templates for key activities like cost estimating and creating a cost management plan. You’ll learn important terms, best practices, and subtle distinctions (such as the difference between cost management and strategic cost management), as well as how cost management works in specialized cases, like construction and IT projects.

What Is Project Cost Management?

Whether you are developing a new product, designing a facility, or changing a key process, it’s challenging to forecast and manage project costs effectively.   In fact, the job is so challenging that half of all large IT projects massively blow their budgets , running on average 45 percent over budget and seven percent over time, according to consultants McKinsey & Co. and the University of Oxford. For projects in other sectors, the news is no better. The Project Management Institute (PMI) reported in 2016 that companies were completing only 53 percent of projects within their original budget. However, strong cost management helps you avoid that fate. So what exactly is cost management?   Cost management refers to the activities concerning planning and controlling a project’s budget. Effective cost management ensures that a project is completed on budget and according to its planned scope. Since you assess the success of a project at least in part by its cost performance, cost management is a prime determinant of project outcome.   Cost management activities are conducted throughout the project life cycle, from planning and budget allocation to controlling costs during project execution and assessing a project’s cost performance upon completion.   Although cost management includes a whole ensemble of activities, it is sometimes referred to in terms of more specific functions, such as spend management, cost accounting, and cost transparency. Cost managers sometimes use these terms as loose synonyms for the broad cost management function.

Cost Management: Four Major Steps

The Project Management Body of Knowledge (PMBOK), the bible of project management theory, says cost management is made up of four processes. These generally adhere to the sequence that follows — as a project goes from the planning board to reality.

Diagram-of-Project-Cost-Management-Phases

  • Resource Planning: Part of the initiation stage of a project, resource planning uses a work breakdown structure — a hierarchical representation of all project deliverables and the work required to complete them — to calculate the full cost of resources needed to complete a project successfully. Managers typically determine required resources for each work breakdown structure component and then add them to create a total resource cost estimate for all project deliverables.
  • Cost Estimating: Cost estimating is an iterative process that uses a variety of estimating techniques to determine the total cost of completing a project. Cost estimating techniques vary widely in their approaches to computing project costs, and stretch from conceptual techniques that draw mainly from historical experience and expert judgment to determinative techniques that estimate costs on a component-by-component basis. We will discuss these techniques in detail later, as they vary in their levels of accuracy. Determinative techniques are the most accurate; however, while the estimator’s job is always to create the most accurate estimate possible, determinative estimating techniques are only an option if you’ve reasonably finalized a project’s scope and deliverables. As such, you use the less accurate estimating techniques during the earliest stages of project planning, and then revise and update estimates as the project continues to be defined. To learn more about cost estimating, read The Ultimate Guide to Project Cost Estimating . 
  • Cost Budgeting: Once you’ve created satisfactory estimates, you can finalize and approve the project’s budget. Cost managers typically release budgeted amounts in stages according to the level of a project’s progress. These allocations include contingencies and reserves.
  • Cost Control: Cost control is the practice of measuring a project’s cost performance according to cost and schedule baselines that provide points of comparison throughout the project life cycle. The specific requirements for effective cost control are set out in the project management plan. The individual in charge of cost management investigates the reasons for cost variations - if they deem cost variations unacceptable, corrective action is likely. Cost control also includes other related responsibilities, such as ensuring that updated project budgets reflect changes to a project’s scope.

Key Components of the Cost Management Plan

The cost management plan guides these four processes. Created during the project planning phase, the cost management plan is a document that defines how you manage, control, and communicate a project’s costs in order to complete the project on budget.   Among other things, a cost management plan identifies the individual or group responsible for cost management, details how you will assess a project’s cost performance, and sets rules for how to communicate cost performance to project shareholders. It also establishes the methodologies by which you will control project cost variations.   While you can customize a cost management plan to fit your organization’s needs, they generally follow a standard format. Sections often include the cost variance plan, the cost management approach, information on cost estimation, the cost baseline, cost control, and reporting processes, the change control process, the project budget, and approvals. You may also want to include the spending authority levels for key project personnel, specifying which roles can approve costs up to specific thresholds.   Let’s look at the sections in greater depth:

  • Cost Variance Plan: Cost variance is when the actual amount differs from the budgeted amount. In your cost management plan, you’ll need a section that details the actions you should take, including who is held responsible in the case of a cost variance. The size of the variance usually necessitates different action: a cost variance of less than five percent might result in an explanation of that variance, while a 95-percent-or-greater variance could force the project to be abandoned. To learn how to calculate cost variance, read Hacking the PMP: Studying Cost Variance . For a more detailed template on tracking schedule and budget variances, see this template:
  • Cost Management Approach: This section outlines the approach a manager uses for cost management. The level of rigor can vary, but this describes how to establish a cost baseline and how to compare actual costs. You usually track and report costs through control accounts, where you roll up costs of subtasks. This often occurs at the third level of the work breakdown structure, a tool that breaks a project into small components or chunks of work to determine the resources needed to complete a job or project. However, the point at which you track and report depends on the scope of the project.
  • Cost Estimation: Here you will define the methods used for estimating project costs, the levels of variation, and the expected precision, accuracy, and risk.
  • Cost Baseline: This has a specialized meaning in project management and represents the authorized, time-phased spending plan against which you measure cost performance. It’s the sum of the estimated project cost and contingency reserves. 
  • Cost Control and Reporting Process: This section establishes how you measure costs and their key metrics during the project. We’ll provide greater detail on this later.
  • Change Control Process: This describes the process for making changes to the cost baseline and how to approve those proposed changes.
  • Project Budget: The budget builds on the cost baseline by totalling the cost of executing the project (including contingencies for possible risks). It also adds in management reserves, which is an amount to cover unanticipated risks or unidentified events that may arise. An organization will usually set a policy for this, and the amount is often five to 15 percent of the total budget.

Cost Management Activities: Essential Functions at Each Phase

Cost management includes a number of activities conducted at different phases during the project life cycle. It’s important to include the cost management function while developing project plans so that you build solid financial controls into the project structure. Here are some key terms and stages relevant to cost management:   Planning: Using the work breakdown structure to determine the resources needed to complete a job or project.   Estimating: The act of calculating or predicting the expected total cost of completing a project.   Budgeting: The authorization of a budget based on a cost estimate to complete the project. You typically authorize budgets in tandem with schedules, so you can assess cost performance at specific points.   Financing and Funding: The process of requesting, authorizing, and receiving money for a project.   Cost Management: The general practice of overseeing project expenditures and making cost-related decisions throughout the project life cycle.   Controlling: Addressing cost variations to avoid cost overruns.   Job Control: Controlling project expenditure by comparing costs predicted by the cost estimate and costs actually being incurred.   Scheduling: You can determine a project’s cost performance by using a schedule that compares the expected expenditure to the actual costs the project is incurring at any point in time.   Accounting: The practice of recording expenditures and reconciling transactions.

How Accurate Project Cost Estimating Aids Cost Management Efforts

The first step towards robust cost management is having a clear idea of your project’s likely costs. However, it’s futile to track and control costs if you base your spending on unrealistic estimates.   Project estimating considers several variables, including the method you use to create the estimate, the stage at which you build your estimate, and the types of cost you include.     The first variable is the method you employ. You can produce cost estimates using a variety of estimating techniques, depending on the extent to which you define a project and the type of information you have access to. Here are some common estimation techniques:

Analogous Estimating: This uses historical data from similar past projects to create estimates for new projects. This method works if you have experience with projects of the same type.

Parametric Estimating: This method estimates time and cost by multiplying per unit or per task amounts by the total number expected in the project. The rates are often standard or publicly published rates and can be expressed in hours of work, amount of data entered, or the number of units of a product manufactured. This technique has a reputation for good reliability, but it’s less relevant when output isn’t uniform, such as when writing computer code. Some projects have widely varying or unprecedented tasks, so they do not lend themselves to this method.

Bottom-Up Estimating: This is a determinative estimating technique that estimates costs for work breakdown structure components and adds them together to create a cost estimate for an entire project. The project team members help create the estimate. Since the people who are going to be doing the work are engaged in estimating, professionals consider this method highly accurate, as well as a team commitment builder.

Three-Point Estimating: This is a PERT -related statistical method that uses the optimistic (lowest), pessimistic (highest), and most likely cost estimates to create expected values and standard deviations for project expenditures.

Software-Based Estimating: You can use software-based estimating techniques, such as Monte Carlo simulation, to model the effects of risk events on project costs.   Another factor influencing the cost estimating is the stage at which you build your cost estimate. As a project progresses, you discover more variables and actual costs, so project estimates become more refined. You can classify cost estimates based on how well you define the project scope at the time of estimation and on the type of estimation technique you use - the latter generally determines the accuracy of an estimate. In order of accuracy, the main classes of cost estimates are:   Order of Magnitude Estimates: These are very rough cost estimates based on expert judgment and on adjusting the costs of the current project to reflect the costs of similar, past projects. Created before fully defining projects, they are only used in high-level project screening.   Preliminary Estimates: A preliminary estimate uses somewhat-detailed scope information to form estimates based on unit costs. These estimates are accurate enough to use as the basis for budgeting.   Definitive Estimates: Created when you’ve fully defined a project’s scope, a definitive estimate uses deterministic estimating techniques, such as bottom-up estimating. Experts agree that definitive estimates are the most accurate and reliable.   The final variable affecting project estimation is the type of cost included. Of course, your project budget must include all the relevant costs for labor and materials, but whether you include a portion of your organization’s indirect costs depends on the policies of your organization and the type of project. Here are the terms experts use to distinguish between various types of costs:   Direct Costs: Direct costs are those which you can directly associate with a specific cost object. They are billable to specific projects.

Indirect Costs: You cannot associate indirect costs with a specific cost object, and you typically incur indirect costs by a number of projects at the same time. They are not billable to specific projects.

Fixed Costs: Fixed costs are costs you incur during manufacturing that are not associated with the volume of produced output.

Variable Costs: Variable costs are costs you incur during manufacturing that are directly associated with the volume of produced output.

Sunk Cost: A sunk cost is an expense you cannot recoup once it is incurred.

Opportunity Cost: When selecting a course of action, its opportunity cost is the loss of potential benefits from all alternative courses of action.

Costing Techniques Determine How to Account for Project Costs

A costing technique is the way in which you compute the total cost of producing a product or performing a task. Depending on the activity or activities being costed, you may use a variety of techniques. Here are some commons ones:   Job Costing: Managers use job costing, also called job-order costing, to determine the cost of a product that is unique or dissimilar to other products. In industries such as construction, it’s extremely rare for two jobs to be identical. Job-order costing uses a unique job-cost record that compiles total labor and resource costs, as well as applicable overheads, for each task or activity completed as part of a task to determine total expenditures for the job. The job-cost record includes both direct and indirect costs.   Process Costing: You use process costing to determine costs for products or tasks that are identical. Unlike job costing, it does not compute the total cost of a product by summing up the costs of all tasks and activities that go into creating the product. Instead, process costing looks at the processes included in the mass production that creates products. By dividing the total cost of a process by the number of units output, it is possible to determine the cost per unit of each process. After this, you may total the costs per unit of every process involved in the eventual manufacturing of the product. In this way, you compute the cost per unit of each product on a process-by-process basis.   Activity-Based Costing: Activity-based costing (ABC) is an approach to assigning overhead costs to products. Since overhead cost allocation based simply on the number of machine hours needed may be misleading, this costing technique looks at the activities focused on creating a product — testing, machine setup, etc. — and then assigns portions of their costs to all products created using these activities. Products that were not created via these activities do not have shares of these activities’ costs added on.   Direct Costing: Direct costing, also called contribution costing or variable costing, is a technique that only assigns variable manufacturing costs to the cost of a product. You do not add fixed manufacturing costs to the cost of creating a product but instead associate those costs with the time period during which you incur them.   Life-Cycle Costing: Life-cycle costing is a comparative analysis technique that involves summing the total costs incurred during the life cycles of project options in order to choose the best option. Since starting capital costs may not be an accurate representation of how much a project will eventually cost, life-cycle costing includes all costs associated with ownership — including maintenance and disposal costs — to enable better decision making. 

Measuring Project Performance With Cost Management KPIs

Once your budget is approved and your project is under way, you’ll want to benchmark your progress relative to your cost management plan. First, there are some key metrics and performance indicators to understand:     Project Cost Performance: A project’s cost performance is an assessment of how actual expenditure on a project compares with planned expenditure as detailed in the project budget. The project manager communicates a project’s cost performance to the project stakeholders, and it may serve as the basis for preventative or corrective actions to avoid cost overruns.   Earned Value: Earned value is a method of measuring project cost performance. It is based on the use of planned value (where you allot specific portions of a project’s budget to the project tasks), and earned value (where you measure progress in terms of the planned value that is earned upon completion of tasks). You may contrast the earned value with the actual cost -  the expenditure you actually incur up to a certain point in the project schedule - to see how actual project costs compare to expected project costs.   Cost Performance Index (CPI): This is a measurement of how earned value compares to actual cost. This ratio measures a project’s cost efficiency at a given point in time by expressing earned value in proportion to actual cost. To calculate CPI, divide earned value by actual cost. A result of 1 means the project is exactly on budget; a number above 1 means it is under budget.

To learn more about KPIs in project management, read All About KPI Dashboards .

How to Control Costs

Effective cost control means performing a number of related activities that all begin by monitoring costs — since you can’t know if costs are greater than planned unless you are tracking actual expenses. Then, project managers need to decide how to respond to cost variances. Here are some key steps and concepts that inform the cost control process:   Monitoring Cost Performance: A project manager routinely monitors a project’s cost performance by creating performance reports that summarize current performance and forecast whether you will complete the project on budget. You provide project stakeholders with information about a project’s cost performance.   Reviewing Changes: You must amend the cost baseline to reflect all cost-related changes, and you should inform the project shareholders about all changes.   Actual Costs versus Budgeted Costs: Upon milestone and entire project completion, you examine the variances between actual costs and budgeted costs. Responses to the cost management plan will depend on the magnitude of the variance and the stage of the plan - this could range from a discussion to changes in the project scope that reduce costs.   Reserve Analysis: Use reserve analyses to allocate contingency reserves to projects based on the likelihoods and magnitudes of risk.   Cash-Flow Analysis: Used in financial reporting, cash-flow analyses detail cash inflows and outflows over a given period of time, and provide starting and ending balances.   Learning-Curve Theory: The learning-curve theory applies to the relationship between the time spent producing a unit and the number of units produced. According to the theory, the time spent on each unit should decrease as workers gain experience and therefore produce units faster.   

Cost Management vs. Strategic Cost Management

While cost management reduces expenses regardless of their cause or purpose, strategic cost management is a sub-discipline that strives to manage cost while also making the organization stronger.    Robin Cooper, Professor of Management at Claremont’s Peter F. Drucker Graduate Management Center and Regine Slagmulder, Professor of Management Accounting at Tilberg University in the Netherlands, define strategic cost management as the “application of cost management techniques so that they simultaneously improve the strategic position of a firm and reduce costs.”   Strategic cost management centers on the idea that cost reduction initiatives can affect an organization’s strategic position. Strategic cost management emphasizes considering the strategic and financial impact of cost management techniques.   Cooper and Slagmulder classify cost management initiatives as one of three types based on how the initiative affects the organization:   Strengthen: An example of an initiative that strengthens competitive positioning is a taxi service that replaces its phone booking system and team of booking agents with an app that allows people to book taxis using their mobile devices. An initiative like this both reduces costs and gives a company a strategic advantage, as it makes it easier to book taxis on short notice.   No effect: An initiative that has no effect on competitiveness might concern a publishing house that outsources proofreading tasks to international freelancers who accept lower wages. While this increases the company’s profitability, it does not affect its strategic positioning.   Weaken: Finally, an initiative that actively harms competitive positioning might involve the taxi company decreasing the frequency of regular vehicle maintenance, a move which, while saving costs initially, will result in cars breaking down more often.   Strategic cost management also comprises a number of important strategies:   Relevant Cost Strategies: Use relevant cost strategies to compare and decide between alternative courses of action. Relevant costs are costs you can reduce by adopting a particular course of action. They are different from sunk costs (which you cannot recoup once spent) and fixed overhead costs (which are the same for all potential courses of action). When you make decisions, a relevant costs strategy focuses only on costs that vary among options.   Evaluating Opportunity Costs: Evaluating opportunity costs is a more holistic approach to decision making that considers not only all the monetary aspects of alternative courses of action, but also all the intangible aspects. For example, a company providing vehicle repair services might have to decide between two qualities of engine oil, taking into account both that one is more expensive than the other and that the more expensive engine oil also preserves engine health in the long term.   Balanced Scorecard Strategy: A balanced scorecard strategy allows businesses to assess the impact of cost management initiatives across four key areas: financial results, customer impact, internal business processes, and employee growth and development. It provides a framework for thorough consideration of the impacts of cost management initiatives. 

Getting Into the Details: Cost Accounting in Project Cost Management

Cost accounting involves the recording and classification of costs associated with a project. It is an internal practice that supports managerial decision making and is a primary discipline concerning cost management.

Cost accounting is different than general financial accounting. Financial accounting concerns  reporting an organization’s past financial performance and does not delve into extensive detail. Since you carry out cost accounting for a specific area of activity within a company — such as a particular project or geographical region — it focuses on more granular aspects and may include projections of future costs.   Cost accounting involves preparing reports for an organization’s management (these reports are not distributed externally). By contrast, financial accounting deals with standardized reports that may be distributed to a variety of stakeholders and regulators.   As such, you typically perform cost accounting on an as-needed basis, such as during a strategic project, and it does not follow a mandated format. Financial accounting, on the other hand, is a mandated and regulated formal process, and you must create financial reports according to international financial reporting standards.   There are a few commonly used cost accounting approaches:   Standard Cost Accounting: This is based on the concept of efficiencies , or ratios that compare the time and resource costs of actually completing an activity with the costs of completing the activity under standard conditions. Variance analysis is a core element of standard cost accounting. However, since the idea of efficiencies is based on a paradigm in which labor costs contribute substantially to manufacturing — which is no longer the case — standard cost accounting is somewhat outdated.   Activity-Based Costing: This is an approach to assigning overhead costs that examines activities that provide a service, execute a task, or create a product, and then assigns portions of their costs to output.   Resource Consumption Accounting (RCA): This approach emerged around 2000, and assigns costs based on the consumption of resources. It uses a German cost management system known as GPK and activity-based costing, a cost allocation method.     Throughput Accounting: This is an accounting approach that aims to maximize profitability by increasing the rate of production of goal units and minimizing operating expenses and investment costs.   Life-Cycle Costing: This is a method of analyzing project alternatives that focuses on total costs of ownership and selecting the most cost-effective option based on more than simple capital costs.   Environmental Accounting: Reporting the environmental costs incurred by a company or project’s activities.   Target Costing: This uses a predetermined market price and preferred profit margin to determine how much money can be used to create a product or service. The target cost is the maximum amount you can spend on production without affecting the profit margin.    Cost Coding: To make cost accounting easier, most organizations have adopted a method of identifying costs with a code, usually a number. The root of the code usually represents the type of expense, cost center, or business unit involved. This makes it easier to group and find related expenses in financial reports. Individual projects may be assigned their own code.   A common structure in an enterprise or very large organization is a top-level, four-digit code that relates to the accounting entity (for example, a subsidiary company). The next numbers pertain to department, followed by a number for the cost, which can be a cost center, profit center, work-breakdown-structure element, fund, or internal order. This facilitates the cost management process by aligning the cost codes with the work breakdown structure, which makes it easier to calculate financial performance.   In addition, costs in cost accounting may be classified by:  

  • Traceability: Direct and indirect costs
  • Behavior: Fixed or variable costs
  • Controllability: Controllable or uncontrollable costs
  • Time Incurred: Historical or predetermined costs
  • Normality: Normal or abnormal costs
  • Functions: The organizational function by which you incur a cost

  Cost accounts make it easy to identify cost overruns in specific sectors that might otherwise be lost in a budget overview. However, managing a large number of cost accounts — up to several hundred accounts and sub-accounts on larger projects — comes with its own challenges. It demands a higher degree of organization in accounting, for one, and classifying costs becomes more time consuming.   In addition, the system of categorization you use for a project’s cost accounts may not match up with the system of categorization you use for an organization’s cost accounts. This complicates the creation of a project budget from a final cost estimate, and is likely to happen when you create cost accounts using a system of categorization different than the performing organization uses.

Aside from recording historical expenditure, project managers must also forecast expected activity costs to ensure that they remain under control. Managers can do this through the use of tables that classify costs for individual cost accounts and cost modeling techniques that indicate whether work associated with a particular activity is due to be completed on budget.

Software’s Role in Project Cost Management

Cost management software simplifies and expedites project cost management activities. This can ease the burden on project cost managers and make it easier to extract insights, such as the cost performance index. Some of the common functionalities include:   Project-Tree Building: A visual representation of a work breakdown structure. This can be useful when employing deterministic estimating techniques.

Cost Estimation: Cost management software can provide powerful estimation capabilities such as using project trees to record activity costs, or running regression analyses to determine cost-estimate relationships in historical data.   Project Cost Management Templates: For projects that are similar, cost management ]templates can expedite cost management activities.   Budgeting: Cost management software can make it easier for project managers to conduct budget planning activities and allocate funding. 

Keep Projects On-Budget Using a Cost Management Template

One tool that can help with project cost management is Smartsheet, a collaborative work management and automation platform. As a cloud-based platform, you can share and collaborate on your cost management activities with internal and external stakeholders, and access the information from anywhere, on any device. 

Plus, with a pre-built, customizable template in Smartsheet, you can get started faster than ever. Track project and budget performance all in one sheet. Use symbols to quickly identify tasks that may be at risk of going over budget, and bring visibility to status of estimated versus actual labor, materials, and other costs. Set up alerts and reminders to notify you as costs change, and attach documents like invoices and purchase orders directly to tasks, to keep details in context.

Try one or all of the following templates to help ensure your next project stays on budget: 

Project Budget Template

Project Budgeting Template

‌ Download Project Budget Template

Excel | Smartsheet

Cost Management Plan Template

Project Cost Management Template

Download Project Cost Management Template

Activity Cost Estimate Template

Activity Cost Estimate Template

Download Activity Cost Estimate Template

‌ Smartsheet Project with Schedule & Budget Variance Template

Cost Management for IT Projects

IT project costs are notorious for going over budget, mainly because of development approaches that allow scope creep during the product development life cycle. There is also a tendency for IT cost estimates to be less fixed than those of hard projects in fields such as construction and engineering, where maturity in planning and estimating is higher. In Information Technology Project Management , Kathy Schwalbe suggests that the people creating cost estimates for IT projects lack experience compared to specialist cost surveyors who create cost estimates for construction projects.   Furthermore, given how multifaceted these projects tend to be and how quickly IT evolves, IT projects often suffer from the “first-time, first-use penalty,” which means that it is hard to form accurate estimates when a project or project elements have not been attempted before. This makes documenting lessons learned crucial for IT projects.   The U.S. research and advisory firm Gartner creates a research report for the project and portfolio management market that categorizes vendors into four categories based on their ability to understand market needs and to drive the acceptance of new technologies. These are graphed on axes labeled “completeness of vision” and “ability to execute,” respectively. The “magic quadrant” is the upper right of this graph in which leaders in both areas cluster.  

Cost Management in Construction Projects

Construction project cost managers, or quantity surveyors, oversee cost estimation and cost control while maintaining a project’s profitability. They are responsible for ensuring that a project remains within budget while meeting its scope, quality, and performance requirements.   Though the majority of construction projects are not subject to the “first-time, first-use penalty,” they are still highly complex. And as hard projects, their design, scope, and budgetary requirements must be planned before work begins. Experience and formal training are essential for quantity surveyors.   The evaluation and recommendation of bids is one of the quantity surveyor’s primary responsibilities, though they may be engaged in a project from inception to conclusion. In fact, quantity surveyors get their name from the bill of quantities , a cost estimate prepared by the surveyor and by which contractors’ tenders are assessed.

To aid cost management for large, complex projects, quantity surveyors or project managers may use cost codes discussed earlier to set up multiple cost accounts. These accounts are essentially portions of budget marked for specific expenses such as labor, construction materials, architectural design, etc.

Home Construction Budget Template

Home Construction Budget Template

Download Construction Budget Template

Excel |  Smartsheet

Construction Estimator Template

Construction Estimator Template

Download Construction Estimator Template

Excel  ‌| Word | PDF |  Smartsheet    

Exploring Cost Management as a Career

Professional cost managers, sometimes called quantity surveyors, work on large projects (such as construction). But project managers also need an understanding of cost management strategies and techniques to perform their duties.   Cost management requires creative problem-solving skills and a thorough understanding of the factors that affect project costs. As such, cost managers are in high demand and have opportunities to progress to lead project managers.   One popular cost management profession is cost accounting, which is determining the costs focused on creating a product or providing a service. Cost accountants deal with budget preparation and profitability analysis, and their main responsibilities include collecting and communicating cost-related data to aid management decision-making and create financial transparency.   Cost accountants typically study accounting or finance at the undergraduate level, and many pursue master’s degrees in business administration or finance with a specialization in accounting. They typically need a license to advance their careers, which can be obtained after meeting some combination of work and educational requirements.

How Smartsheet Can Help with Cost Management Across Your Projects

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Project cost management: Definition, steps, and benefits

Julia Martins contributor headshot

Cost management is the process of planning, budgeting, and reporting project spend in order to keep teams on budget and overall costs reasonable. In this article, we'll go over the four functions of cost management and explain exactly how to use them to improve your project's bottom line.

What is cost management?

Cost management is the process of estimating, budgeting, and controlling project costs. The cost management process begins during the planning phase and continues throughout the duration of the project as managers continuously review, monitor, and adjust expenditures to ensure the project doesn't go over the approved budget.

Why is cost management important?

Have you ever wondered what happens when a project goes significantly over budget? The consequences can be severe—from strained relationships with clients to financial losses. Let's consider an example:

A small software development team was tasked with creating a custom application for a client. Midway through, they realized the project was quickly exceeding the initial budget. They faced a common dilemma: continue as planned and absorb the extra costs or re-evaluate their approach.

By implementing rigorous cost management strategies, the team was able to identify areas where expenses were ballooning. They streamlined their project management processes, prioritized essential features, and renegotiated terms with subcontractors. This approach not only brought the project back within budget but also improved their working relationship with the client, who appreciated their transparency and commitment to delivering value.

This scenario highlights how effective cost management can transform a potentially disastrous situation into a success story.

How to create a cost management plan

Cost management is a continuous, fluid process. However, there are four main elements or functions that can be found in any cost management plan:

Cost estimating

Cost budgeting, cost control.

Because new expenses can appear and project scope can be adjusted, cost managers need to be prepared to perform all four functions at any time throughout the project life cycle. Your workflow will vary according to the project’s needs.

Here, we'll break down each of the four elements in greater detail and explain what is required from the cost manager at each stage.

[Inline Illustration] cost management (infographic)

The very first step in any cost management process is resource planning, which is when the cost manager reviews the project's scope and specs to figure out what resources the project will require.

A resource is anything that helps you complete a project—including tools, money, time, equipment, and even team members. To create the most accurate resource plan possible, consult directly with team leads and stakeholders about what resources they will need during the project. People with hands-on experience in each project department will have a better understanding of what resources will be required. 

For this step, you'll need:

Clearly defined project objectives

A high-level project roadmap or a work breakdown structure (WBS) , depending on the complexity of the project

A tentative resource management plan

A project scope statement

Once you have a list of necessary resources, the next step is to estimate what it will cost to procure them. The key to this step is to gather as much pricing information as possible so that you can make informed cost estimates.

For tangible resources like tools, supplies, and equipment, get real price quotes from sellers to inform your cost estimate. For labor costs, get multiple price quotes from potential contractors to help give you a realistic idea of what the work you require will actually cost. Keep in mind that some time may pass between when you make your estimate and when these items will be purchased, so you should build in some room in case prices rise. 

In addition to building in a cushion for each individual cost, you'll also need to add a buffer of 5–10% to your cost total to account for unexpected expenses. If this is your first time working with this project team, find out if the previous cost manager generated budget reports at the end of past projects. 

You can take a look at how much previous projects' final costs deviated from their initial estimates and use this cost data as a benchmark to estimate how much of a margin you need to build into your estimation report.

In the estimation stage , you'll need:

Project schedule or a PERT chart , depending on the complexity of the project

A list of your project deliverables

Clearly defined success metrics

Now that you have general estimates for your project needs and resource requirements, you can begin to work on your project budget . Your project budget is a detailed plan of how much you plan to spend during the project, for what, and by when. 

Depending on the complexity of your project, the “when” may significantly influence your cost management strategy. For multi-year projects, you may want to specify cost allocations so that no more than 30% of your budget should be spent in the first year, etc. This can prevent cost overruns later down the road.

In this stage, you'll need:

A project budget document 

A project stakeholder analysis

The bulk of the cost management process is made up of cost control . This is the process of recording and accounting costs as the project progresses, making adjustments, and alerting stakeholders to problems when they occur. The goal of the cost control step is to compare actual project costs with original budgets and estimates and take steps to make sure the project stays as close to plan as possible.

The frequency with which you review this will depend on your project. Sometimes you’ll want to review costs in real time. In other cases, you may check in monthly or even quarterly. Share cost updates as necessary through project status reports so the entire project team is on the same page.

Keep in mind that any changes to the project scope will impact the project budget and costs, so keep a close eye on scope creep. If the project cost deviates too much from what you budgeted, let your stakeholders know so you can proactively come up with an action plan.

Project management tool

Universal reporting tool

[inline illustration] cost management (infographic)

Post-project cost accounting

Once the project is over, it’s time to calculate cost variance and evaluate how far your project deviated from your original budget and estimates. What were the project’s total costs? How did your actual costs compare to your estimated costs? 

A successful project ends close to (but under) the forecasted project budget. If you spent too much money, you either underestimated your project budget or had too many unforeseen expenses. If this happens, hold a project post-mortem meeting to evaluate why that happened and prevent it from happening in the future.

On the flip side, spending too little of your budget is also not ideal. You estimated these costs for a reason, and if you came in significantly under budget, your cost-budgeting process was inaccurate. Log this information as historical data and keep it in mind for future projects, so you can increase your accuracy during the cost estimation phase.

How to calculate project costs

To ensure that your project stays profitable and within budget, it is essential to have a solid understanding of how to calculate project costs. 

Project managers have a variety of cost management methods to choose from, and picking the best one depends on the specific needs and scope of your project. Consider factors like project complexity, the predictability of tasks, client expectations, and the level of flexibility you'll need to achieve your cost-performance goals.

Calculating project costs on an hourly basis involves paying for the amount of work done, measured in hours. This method is particularly effective for projects where the scope is flexible or uncertain because it allows for adaptability as the project progresses. 

For example, consider a software development project. The development team's cost is calculated based on the number of hours they spend on the project. If the team works 100 hours a month at a rate of $100 per hour, the project costing for that month would be $10,000. This method provides flexibility and can accommodate changes in the project's scope effectively.

A flat rate, or fixed price, approach involves agreeing on a total project cost upfront. This method is ideal for projects with a well-defined scope and deliverables. This gives both parties a clear understanding of the total cost.

Imagine a marketing campaign. The agency and the client agree on a fixed price of $20,000 for the entire campaign. This price covers all aspects of the project, from planning to execution. The advantage here is predictability in budgeting, as the client knows exactly how much the project will cost, irrespective of the time and resources utilized.

The cost-plus method involves charging the actual costs of the project plus a markup or additional fee. This approach is often used in long-term projects where the costs cannot be accurately estimated at the start. It ensures that all project costs are covered and includes a profit margin.

For instance, in a construction project, the contractor charges for the actual costs incurred (like materials and labor) plus a fixed percentage as profit. If the material and labor costs amount to $50,000 and the agreed markup is 20%, the total charge to the client would be $60,000. This cost management method aligns the interests of the client and the contractor, as both parties aim for optimal cost performance.

Value-based pricing

Value-based pricing focuses on the value or benefit the client receives rather than the cost of the project itself. This estimation method is ideal for projects where the outcome has a high perceived value, regardless of the actual cost of delivery.

Consider a scenario where a consulting firm is helping a client increase their annual revenue. If the consultant's strategies result in a $1 million revenue increase, the consultant may charge a fee based on a percentage of the revenue increase, say 10%, which would be $100,000. Value-based pricing ensures that the pricing reflects the value delivered.

Effective project cost management methods

One of the most persistent challenges faced by teams across various industries is controlling and preventing budget overruns. These overruns not only strain financial resources but can also lead to compromised project quality, delayed timelines, and even project failure. 

Effective cost management is the key to tackling this challenge because it makes certain that projects are delivered within their allocated budgets while maintaining high standards of quality and efficiency.

Choosing the best cost-management method is key to addressing these financial challenges head-on. For further cost optimization, teams can leverage automation, management software, and dashboards that offer real-time cost analysis, cash flow, and future cost visualization. This will ultimately contribute to the success of your project.

Top-down estimating

Top-down estimating is a method where the overall project cost is estimated first, and then individual costs are deduced from this total. This approach is beneficial in the early stages of project planning, when detailed information is not yet available. It gives a quick and rough idea of how much the project will cost.

For example, in a new software development project, the project manager might estimate the total project cost at $200,000 based on previous similar projects. This total cost is then broken down into smaller segments like design, coding, testing, and deployment, each allocated a portion of the total budget. This method is effective for providing a preliminary cost framework and guiding early project decision-making.

Bottom-up estimating

Bottom-up estimating is the reverse of the top-down approach. It involves estimating individual tasks or components of the project first and then adding them up to get the total project cost. This estimation method is more accurate and reliable, especially for projects with a well-defined scope, as it considers detailed cost information.

Consider a construction project where each part of the project, such as foundation laying, framing, plumbing, and electrical work, is estimated individually based on detailed analysis. After estimating all these components, the costs are summed up to determine the overall project budget. Bottom-up estimating is ideal for teams that need precise control over each aspect of the project's costs.

Earned value management

Earned value management (EVM) is a sophisticated approach to cost management that combines measurements of project performance in terms of scope, schedule, and cost. EVM provides a comprehensive view of the project's progress and its alignment with the original project planning.

For instance, in a large infrastructure project, EVM would be used to track the following: 

Budgeted cost of work scheduled (BCWS)

Actual cost of work performed (ACWP)

Budgeted cost of work performed (BCWP) 

By comparing these figures, project managers can gauge the project's cost performance and take corrective action if necessary.

Three-point estimating

Three-point estimating is used to determine a more realistic estimate by considering three scenarios: 

Most optimistic (best-case) 

Most pessimistic (worst-case) 

Most likely 

This cost management method provides a range of possible outcomes, which can increase the predictability and cost performance of a project.

Take, for example, a new product development project. The project manager might estimate that the design phase could take 30 days (optimistic), 45 days (most likely), or 60 days (pessimistic). Using these three points, they calculate an average or weighted average duration, which helps in setting realistic timelines and budgets.

FAQ about cost management

What is the first step in project cost management.

The first step in project cost management is to define the baseline for your project's budget. This involves identifying all potential costs and inputs related to the project, including labor, materials, equipment, and any other expenses. Creating a baseline is essential because it provides the framework for monitoring and controlling expenses during the lifecycle of a project.

What are the 5 functions of cost management?

The five key functions of cost management are:

Cost estimation: Determining the total cost required for completing the project.

Cost budgeting: Allocating the overall cost estimate to individual work items to establish a baseline for measuring performance.

Cost control: Monitoring project expenses and implementing measures to keep costs within the approved budget.

Cash flow management : Ensuring there is adequate cash flow to meet project needs, which is critical for maintaining project momentum.

Procurement management: Managing the procurement of goods and services, ensuring that everything is obtained at the best possible cost and meets project needs.

What is cost management in project management?

Cost management in project management is the process of planning, estimating, budgeting, and controlling costs with the aim of completing the project within the approved budget. It involves a continuous process of measuring and monitoring project activities and expenses and implementing necessary adjustments to ensure that the project's financial resources are used effectively. 

Improve your project performance with cost management

Cost management has a lot of moving parts. But as long as your team has visibility into project costs, you can prevent cost overruns and ensure you’re finishing your project under budget every time.

To keep track of all of your project’s information, use a work management platform like Asana. From project costing and kickoff to post-mortem, Asana helps you stay in sync with your project team members and stakeholders during the entire project process.

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Assign access to Cost Management data

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For users with Azure Enterprise (EA) agreements, a combination of permissions granted in the Azure portal define a user's level of access to Cost Management data. For users with other Azure account types, defining a user's level of access to Cost Management data is simpler by using Azure role-based access control (RBAC). This article walks you through assigning access to Cost Management data. After the combination of permissions is assigned, the user views data in Cost Management based on their access scope and on the scope that they select in the Azure portal.

The scope that a user selects is used throughout Cost Management to provide data consolidation and to control access to cost information. When scopes are used, users don't multi-select them. Instead, they select a larger scope that child scopes roll up to and then they filter-down to what they want to view. Data consolidation is important to understand because some people shouldn't access a parent scope that child scopes roll up to.

Watch the Cost Management controlling access video to learn about assigning access to view costs and charges with Azure role-based access control (Azure RBAC). To watch other videos, visit the Cost Management YouTube channel . This video mentions the Azure EA portal, which is retired. However, equivalent functionality that's available in the Azure portal is also discussed.

Cost Management scopes

Cost management supports various Azure account types. To view the full list of supported account types, see Understand Cost Management data . The type of account determines available scopes.

Azure EA subscription scopes

To view cost data for Azure EA subscriptions, a user must have at least read access to one or more of the following scopes.

¹ The billing account is also referred to as the Enterprise Agreement or Enrollment.

² The enrollment account is also referred to as the account owner.

Enterprise administrators can assign the billing account, department, and enrollment account scope in the Azure portal . For more information, see Azure portal administration for direct Enterprise Agreements .

Other Azure account scopes

To view cost data for other Azure subscriptions, a user must have at least read access to one or more of the following scopes:

  • Management group
  • Subscription
  • Resource group

Various scopes are available after partners onboard customers to a Microsoft Customer Agreement. Cloud solution providers (CSP) customers can then use Cost Management features when enabled by their CSP partner. For more information, see Get started with Cost Management for partners .

Enable access to costs in the Azure portal

If you have a Microsoft Customer Agreement (MCA) or an Enterprise agreement, you can enable access to costs in the Azure portal. The required setting varies by scope. Use the following information to enable access to costs in the Azure portal.

Enable MCA access to costs

The Azure charges setting is used to enable access to costs for MCA subscriptions. The setting is available in the Azure portal at the billing account scope. You must have Billing Profile Owners permission to enable the setting. Otherwise, you won't see the setting.

To enable the setting, follow these steps:

  • Sign in to the Azure portal with an account with Billing Profile Owners permission.
  • Select the Cost Management + Billing menu item.
  • Select Billing scopes to view a list of available billing scopes and billing accounts.
  • Select your Billing Account from the list of available billing accounts.
  • In the left navigation pane, select Billing profiles .
  • Select the billing profile.
  • In the left navigation pane, select Policies .

Screenshot showing the billing profile Policies page and options.

Enable EA access to costs

The department scope requires the Department admins can view charges (DA view charges) option set to On . Configure the option in the Azure portal. All other scopes require the Account owners can view charges (Account owner (AO) view charges) option set to On . You must have the Enterprise Administrator role to enable the setting. Otherwise, you won't see the setting.

To enable an option in the Azure portal:

  • Sign in to the Azure portal with an enterprise administrator account.

Screenshot showing the Policies page and options.

After the view charge options are enabled, most scopes also require Azure role-based access control (Azure RBAC) permission configuration in the Azure portal.

Enterprise administrator role

By default, an enterprise administrator can access the billing account (Enterprise Agreement/enrollment) and all other scopes, which are child scopes. The enterprise administrator assigns access to scopes for other users. As a best practice for business continuity, you should always have two users with enterprise administrator access. The following sections are walk-through examples of the enterprise administrator assigning access to scopes for other users.

Assign billing account scope access

Access to the billing account scope requires enterprise administrator permission. The enterprise administrator can view costs across the entire EA enrollment or multiple enrollments. The enterprise administrator can assign access to the billing account scope to another user with read only access. For more information, see Add another enterprise administrator .

It might take up to 30 minutes before the user can access data in Cost Management.

Assign department scope access

Access to the department scope requires department administrator (DA view charges) access. The department administrator can view costs and usage data associated with a department or to multiple departments. Data for the department includes all subscriptions belonging to an enrollment account that are linked to the department.

Enterprise administrators can assign department administrator access. For more information, see Add a department administrator .

Assign enrollment account scope access

Access to the enrollment account scope requires account owner (AO view charges) access. The account owner can view costs and usage data associated with the subscriptions created from that enrollment account. Enterprise administrators can assign account owner access. For more information, see Add an account owner in the Azure portal .

Assign management group scope access

Access to view the management group scope requires at least the Cost Management Reader (or Reader) permission. You can configure permissions for a management group in the Azure portal. You must have at least the User Access Administrator (or Owner) permission for the management group to enable access for others. And for Azure EA accounts, you must also enable the AO view charges setting.

You can assign the Cost Management Reader (or reader) role to a user at the management group scope. For more information, see Assign Azure roles using the Azure portal .

Assign subscription scope access

Access to a subscription requires at least the Cost Management Reader (or Reader) permission. You can configure permissions to a subscription in the Azure portal. You must have at least the User Access Administrator (or Owner) permission for the subscription to enable access for others. And for Azure EA accounts, you must also enable the AO view charges setting.

You can assign the Cost Management Reader (or reader) role to a user at the subscription scope. For more information, see Assign Azure roles using the Azure portal .

Assign resource group scope access

Access to a resource group requires at least the Cost Management Reader (or Reader) permission. You can configure permissions to a resource group in the Azure portal. You must have at least the User Access Administrator (or Owner) permission for the resource group to enable access for others. And for Azure EA accounts, you must also enable the AO view charges setting.

You can assign the Cost Management Reader (or reader) role to a user at the resource group scope. For more information, see Assign Azure roles using the Azure portal .

Cross-tenant authentication issues

Currently, Cost Management provides limited support for cross-tenant authentication. In some circumstances when you try to authenticate across tenants, you may receive an Access denied error in cost analysis. This issue might occur if you configure Azure role-based access control (Azure RBAC) to another tenant's subscription and then try to view cost data.

To work around the problem : After you configure cross-tenant Azure RBAC, wait an hour. Then, try to view costs in cost analysis or grant Cost Management access to users in both tenants.

  • If you haven't read the first quickstart for Cost Management, read it at Start analyzing costs .

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Additional resources

Master Cost Management Planning: Templates, Best Strategies, and Benefits

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In this article, we will explore the importance of a cost management plan in project management. We will delve into the definition, components, and benefits of a well-executed cost management plan. By understanding the significance of effective cost management, you will gain valuable insights to optimize project budgets, control expenses, and enhance overall project success.

What is a Cost Management Plan?

What is included in a cost management plan, why is a cost management plan important, how to make a cost management plan, best practices and considerations when creating a cost management plan, cost management plan templates, strategies for successful cost management planning, benefits of a well-executed cost management plan.

A cost management plan outlines strategies, methodologies, and guidelines for controlling and monitoring costs throughout a project’s lifecycle . It ensures that expenses are effectively managed. By establishing a cost management plan, project teams can make informed decisions, mitigate financial risks, and optimize resource allocation.

The purpose of a cost management plan is to establish a systematic approach to managing project costs, from estimation to final expenditure. It provides clarity and structure to the cost management process, enabling project stakeholders to

1. Budget effectively : A cost management plan facilitates accurate cost estimation, allowing project managers to allocate resources appropriately. It helps in determining the financial feasibility of the project and ensures that sufficient funds are allocated to each phase.

2. Control expenses : Through effective cost control mechanisms outlined in the plan, project teams can monitor expenditures, identify potential cost overruns, and take corrective actions in a timely manner.

3. Optimize resource allocation : By understanding the cost implications of different project activities, a cost management plan enables project managers to optimize resource allocation . It ensures that resources are allocated efficiently, avoiding waste and maximizing productivity.

Cost Estimation Methods

Cost estimation is a key component of a cost management plan. It involves determining the expenses associated with various project activities, tasks, and deliverables. Different methods can be used to ensure accurate cost estimation.

1. Analogous Estimation : This method relies on historical data from similar projects as a reference point for estimating costs. By comparing the current project with past projects of similar scope and characteristics, estimations are made based on previous cost patterns.

2. Parametric Estimation : This method uses statistical models and mathematical relationships to estimate costs. It involves establishing cost drivers, such as size, complexity, or productivity rates, and using these factors to calculate project costs.

3. Bottom-Up Estimation : In bottom-up estimation, costs are estimated at a granular level for individual project components. These estimates are then added to determine the overall project cost. This approach is time-consuming but tends to yield accurate results.

Budget Allocation and Control

Budget allocation and control are key to effective cost management. Once cost estimates are established, the cost management plan outlines how budget will be distributed across different project phases, tasks, and resources. It involves the following considerations:

1. Budget Breakdown : This is a breakdown of how the project budget will be allocated to different work packages, activities, or cost categories. It provides a clear understanding of how financial resources will be utilized throughout the project.

2. Budget Constraints : The cost management plan defines any limitations or restrictions on the project budget. It ensures that project teams operate within the approved budget and helps prevent overspending.

3. Change Control : The cost management plan incorporates mechanisms for managing changes that may impact project costs. It outlines procedures for to assess and approve budget-related change requests and ensures that any modifications are evaluated and documented.

Cost Tracking and Reporting

Cost tracking and reporting are essential to maintain control over project expenditures and evaluate the financial health of the project. The cost management plan establishes guidelines for:

1. Cost Tracking : This involves monitoring actual costs incurred during project execution such as labor, materials, subcontractors, and any other costs. Project teams use tracking mechanisms such as timesheets, invoices, and expense reports to record and monitor costs.

2. Cost Variance Analysis : This is to compare actual Vs budgeted costs. By conducting variance analysis, project teams can identify discrepancies and deviations from the planned budget, enabling them to take corrective actions if necessary.

3. Cost Reporting : The cost management plan defines the frequency, format, and content of cost reports. These reports give stakeholders an overview of the project’s financial performance, highlighting any significant cost variances, trends, or potential risks. Clear and concise reporting helps ensure transparency and facilitates effective decision-making .

Risk Management in Cost Control

Risk management involves identifying and assessing risks that may impact project costs. The plan addresses risk management through:

1. Risk Identification : Outlining processes to identify potential risks that could affect project costs. These risks may include changes in market conditions, resource availability, technology, or regulatory requirements.

2. Risk Assessment : This assessment helps prioritize risks based on their likelihood and potential severity, allowing project teams to allocate appropriate resources for risk mitigation.

3. Contingency Planning : Contingency budgets are allocated to handle unforeseen events, providing a buffer to manage cost overruns or additional expenses resulting from risk events.

t enables accurate budgeting by providing a systematic approach to cost estimation, helping to avoid underestimation or overestimation of project costs. This allows for realistic budget allocations and effective financial planning.

Secondly, a cost management plan facilitates cost control and the avoidance of overruns. By actively monitoring and controlling expenses throughout the project lifecycle, project teams can track actual costs against the budget and identify any variances or potential overruns early on. This allows for timely corrective actions, ensuring that the project stays within financial constraints.

Thirdly, the cost management plan enables resource optimization. By understanding the cost implications of different project activities, it allows for efficient resource allocation. This ensures that resources such as labor, materials, and equipment are allocated optimally to maximize productivity and minimize waste, leading to improved project efficiency.

Lastly, effective cost management contributes to stakeholder satisfaction. By adhering to the approved budget and delivering the project within cost constraints, project teams build trust and confidence with stakeholders. This fosters positive relationships, enhances overall satisfaction, and strengthens the project’s credibility.

A well-executed cost management plan plays a critical role in project success, enabling accurate budgeting, cost control, resource optimization, and stakeholder satisfaction. By implementing effective cost management practices, project teams can achieve better financial control, optimize project outcomes, and ensure the project’s overall success.

Creating a cost management plan involves a systematic approach that ensures thorough consideration of all cost-related aspects. Follow these steps to develop an effective cost management plan:

1. Define Project Scope : Begin by clearly defining the scope of your project. Understand the deliverables, activities, and timelines involved to establish a foundation for cost estimation and management.

2. Identify Cost Categories : Identify and categorize the different cost elements specific to your project. Common categories include labor, materials, equipment, subcontractors, overhead, and contingency. This helps in organizing and allocating costs accurately.

3. Estimate Costs : Utilize appropriate cost estimation methods, such as analogous estimation, parametric estimation, or bottom-up estimation, to estimate costs for each identified category. Consider historical data, expert judgment, and industry benchmarks for reliable estimates.

4. Allocate Budget : Allocate the budget to each cost category based on the estimated costs. Ensure that the budget distribution aligns with project priorities and resource requirements. Account for any known risks or uncertainties by setting aside contingency reserves.

5. Establish Cost Control Measures : Define the mechanisms and procedures for cost control. This includes specifying the frequency of cost tracking, establishing reporting formats, and determining the responsible parties for monitoring and reporting actual costs.

6. Track and Monitor Costs : Implement a robust system to track and monitor actual costs throughout the project lifecycle. Regularly compare actual costs against the budgeted amounts and analyze any variances. This helps in identifying cost discrepancies and taking corrective actions promptly.

7. Adjust and Reallocate Budget : As the project progresses, there may be changes in scope, requirements, or unforeseen circumstances. Continually evaluate the cost performance and, if necessary, reallocate the budget to accommodate changes while maintaining overall financial control.

8. Document Changes and Lessons Learned : Document any changes made to the cost management plan and capture lessons learned during the project. This information can be valuable for future projects, enhancing cost management practices and continuous improvement.

Consider the following best practices to enhance your cost management plan:

Involve Stakeholders: 

Engage relevant stakeholders in the cost management planning process. Gather their inputs, expectations, and insights to ensure that the cost management plan aligns with project goals and stakeholder requirements.

You may like to check: Stakeholder Management Plan Templates | Creately

Use Reliable Data: 

Rely on accurate and up-to-date data for cost estimation, tracking, and reporting. Leverage historical project data, industry benchmarks, and expert opinions to enhance the reliability and accuracy of cost-related information.

Utilize Cost Management Tools:

Explore the use of specialized cost management tools and software that streamline cost estimation, tracking, and reporting processes. These tools can automate calculations, provide real-time insights, and enhance overall efficiency.

Continuously Monitor and Review: 

Regularly review and monitor the cost management plan’s effectiveness throughout the project lifecycle. Implement periodic assessments and audits to identify potential areas for improvement and ensure compliance with the plan.

Communicate and Report: 

Maintain open and transparent communication channels to keep stakeholders informed about cost-related matters. Provide regular cost reports and updates, highlighting any significant cost variances, risks, or mitigation measures.

By following these steps and incorporating best practices, you can develop a comprehensive and effective cost management plan that enables better financial control, cost optimization, and project success.

When creating a cost management plan, you can leverage pre-designed templates to streamline the process and ensure you cover all essential elements. Various cost management plan templates are available online, offering a structured framework that can be customized to suit your project’s specific needs. These templates typically include sections for cost estimation, budget allocation, cost tracking, and risk management.

While using cost management plan templates, it is essential to customize them to align with your project’s unique requirements. Tailor the template by adding or removing sections as necessary, adjusting the budget breakdown, and incorporating any specific cost categories or considerations relevant to your project. This customization ensures that the cost management plan accurately reflects the intricacies of your project and provides a comprehensive roadmap for cost control.

Recommended Template Sources

Project management software: .

Many project management software platforms offer built-in templates for cost management plans. These templates are often integrated into the software’s functionality, allowing for seamless collaboration, real-time tracking, and automated calculations.

Creately is a highly recommended project management software that provides a comprehensive cost management plan template and a range of powerful features. With Creately, you can leverage its intuitive interface and advanced collaboration tools to enhance your cost management planning process. Here’s why Creately stands out as an excellent choice:

  • Cost Management Plan Template : Creately offers a ready-to-use cost management plan template designed to cover all essential aspects of cost estimation, budget allocation, cost tracking, and risk management. This template provides a structured framework you can easily customize to fit your project’s unique requirements.
  • Seamless Collaboration : Creately enables seamless collaboration among project teams, allowing multiple stakeholders to work together in real time on the cost management plan. With features like comments, notifications, and version history, team members can provide feedback, make updates, and track changes efficiently.
  • Real-time Tracking and Reporting : Creately provides real-time tracking and reporting capabilities, allowing you to monitor cost-related data and analyze progress against the budget. You can use visual dashboards, charts, and diagrams to gain insights and present cost information effectively to project stakeholders.
  • Ready to use
  • Fully customizable template
  • Get Started in seconds

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Online Resources and Communities: 

Explore reputable project management websites, forums, and communities that provide free or paid cost management plan templates. These resources often include templates in various formats (e.g., Excel, Word, PDF) that can be downloaded and customized to fit your project’s needs.

Professional Organizations and Associations: 

Professional organizations and associations related to project management may offer cost management plan templates as part of their resources. These templates are often designed based on industry best practices and can provide valuable insights into effective cost management.

When selecting a template, ensure it aligns with your project’s size, complexity, and industry. Consider the level of detail provided, ease of use, and compatibility with your preferred software or tools.

Identifying and Assessing Cost Drivers

One key strategy for successful cost management planning is to identify and assess the primary cost drivers within your project. Cost drivers are factors that significantly impact project costs. By understanding these drivers, you can prioritize cost management efforts and allocate resources more effectively. Some common cost drivers include labor, materials, equipment, subcontractors, and overhead. Analyze each cost driver’s influence on your project and develop strategies to control and mitigate their associated costs.

Establishing Realistic Budgets and Targets

Setting realistic budgets and targets is crucial for effective cost management. Work closely with project stakeholders to define achievable financial objectives based on accurate cost estimates and risk assessments. Consider historical data, industry benchmarks, and expert insights to establish budgetary boundaries that align with project goals. Ensure that budgets are realistic yet challenging enough to foster efficiency and cost consciousness throughout the project.

Implementing Effective Cost Control Measures

Implementing robust cost control measures is essential to keep project expenditures on track. Define clear procedures and protocols for monitoring costs, tracking variances, and taking corrective actions. Regularly review and analyze cost performance, comparing actual costs against the budgeted amounts. Implementing early warning systems and exception reporting can help identify cost deviations promptly. Establishing approval processes for changes that impact project costs ensures proper evaluation and documentation.

Continual Monitoring and Evaluation

Cost management planning is an ongoing process that requires continual monitoring and evaluation. Regularly review and update your cost management plan as the project progresses and circumstances change. Monitor cost trends, analyze cost variances, and assess the effectiveness of cost control measures. Regular evaluations enable proactive decision-making, adjustment of strategies, and improvement of cost management practices.

By adopting these strategies, you can enhance the effectiveness of your cost management plan and improve overall financial control within your project. These strategies promote proactive cost management, risk mitigation, and optimization of resources, leading to better project outcomes and financial success.

Cost Savings and Optimization

One of the primary benefits of a well-executed cost management plan is cost savings and optimization. By accurately estimating costs, allocating budgets effectively, and implementing robust cost control measures, you can identify opportunities for cost reduction and avoid unnecessary expenses. This leads to improved cost efficiency, ensuring that resources are utilized wisely and cost savings are realized throughout the project.

Improved Project Performance

A well-planned and effectively managed cost management plan contributes to improved project performance. By closely monitoring and controlling costs, you can proactively identify and address potential issues, such as cost overruns or budget constraints. This enhances project predictability, minimizes financial risks, and improves the overall performance and progress of the project.

Stakeholder Satisfaction

Effective cost management plays a crucial role in ensuring stakeholder satisfaction. When projects are delivered within the approved budget and financial constraints, stakeholders gain confidence in the project team’s ability to manage resources and adhere to financial objectives. By meeting or exceeding stakeholder expectations related to costs, you foster positive relationships, trust, and satisfaction among project stakeholders.

Lessons Learned and Future Planning

A well-executed cost management plan provides valuable lessons learned for future projects. By analyzing cost variances, identifying areas of improvement, and documenting best practices, you can enhance cost management practices in subsequent projects. Lessons learned contribute to continuous improvement and enable more accurate cost estimation, better budgeting, and enhanced overall project planning and execution.

Wrapping Up

A well-crafted cost management plan is vital for project success, providing a structured approach to estimate, allocate, track, and control costs. Utilize templates, customize them, and implement effective strategies to optimize cost management. Benefits include cost savings, improved performance, stakeholder satisfaction, and lessons learned. 

To streamline your cost management planning, use Creately, a powerful project management software offering a comprehensive cost management plan template. With its intuitive interface, collaboration tools, and real-time tracking. Creately enhances financial control and project success. Maximize cost efficiency and ensure project viability with Creately as your cost management planning solution.

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Module 7: Costing Methods

Introduction to cost management, what you’ll learn to do: discuss the importance of cost management.

People in a meeting reviewing papers with their laptops open.

Managing the costs in a business are crucial to success. There are many different ways to classify costs, which will be discussed in this module. When we discuss costs from a managerial accounting standpoint, the same cost may be classified differently depending on what information is needed.

Being aware of the different cost classifications and ways to look at costs will be an important skill as a manager. It will give you the skills to budget and plan effectively for your department or company.

  • Introduction to Cost Management. Authored by : Freedom Learning Group. Provided by : Lumen Learning. License : CC BY: Attribution
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7.13: Introduction to Cost Management

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What you’ll learn to do: Discuss the importance of cost management

People in a meeting reviewing papers with their laptops open.

Managing the costs in a business are crucial to success. There are many different ways to classify costs, which will be discussed in this module. When we discuss costs from a managerial accounting standpoint, the same cost may be classified differently depending on what information is needed.

Being aware of the different cost classifications and ways to look at costs will be an important skill as a manager. It will give you the skills to budget and plan effectively for your department or company.

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Project Cost Management Basics

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Table of Contents

What is project cost management, how to manage project costs in 4 steps, what is a cost management plan, cost management plan outline.

  • Why Is Cost Management Important?

Cost Management Tips

Projectmanager is your cost management software, free cost management templates.

Cost management is the process of planning and managing the budget of a business or project. In the case of a project, it helps the project manager estimate what the project will cost and set controls to reduce the chances of the project going over budget.

Cost management is one of the most important responsibilities of a project manager; projects always need resources such as materials, labor and equipment, which generate costs. Those costs must be estimated and controlled throughout the project life cycle to complete the project.

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Project Estimate Template

Use this free Project Estimate Template for Excel to manage your projects better.

The four steps below outline how the cost management process works in project management.

1. Resource Planning

Resource planning is the process of forecasting future resource requirements for a business, project or scope of work. To create a resource plan, you need to start by defining the project scope , a document that details the project activities that will be done.

Once the project activities have been defined, project managers usually rely on historical data, expert opinions, and resource planning tools such as a resource breakdown structure (RBS) to estimate the resources that will be needed.

2. Cost Estimating

Cost estimating consists of assigning costs to the resources you need to execute your projects, such as labor, materials and equipment. Cost estimating is one of the most important steps in the cost management process because it lays out the base for your project budget. There are several project cost estimating techniques you can use depending on the characteristics of your project.

3. Cost Budgeting

Based on your cost estimates, you can now create a project budget , which is simply the sum of all your project costs. Make sure to include all types of project costs, including direct, indirect, fixed and variable costs. A project budget should also include contingency reserves in case there’s work that needs to be redone, or a risk has struck the project and risk mitigation strategies need to be taken.

Once the project starts, the project budget is a baseline that’s used to compare actual costs vs. estimated costs. Therefore, project budgets allow project managers to quickly understand if their costs are too high and if there’s a risk of cost overrun .

4. Cost Control

Cost control refers to all the activities, guidelines and procedures taken to minimize and track project costs. Poor cost control can affect the profitability of a project, but luckily project management software can help you to easily keep track of costs with tools such as timesheets, workload planners and project dashboards.

The outputs of these 4 steps can be documented in a cost management plan, a critical component of the project plan.

Effective cost management requires the right software. ProjectManager is the perfect tool to track project costs, resources and workload. Our Gantt charts, project calendars and timesheets allow you to manage costs, time and tasks in one place. Get started for free.

ProjectManager's dashboard view

A cost management plan sounds simple. It’s an outline of the cost estimation for the project—but that includes all allocation and how the project manager will control those costs to bring the project in as budgeted.

A cost management plan must take into account the resources that impact the project budget, whether materials or people. There are also fixed, variable and overhead costs. All these must be calculated to know what your financial commitment to the project will be.

Last but not least is the stakeholder, who has a vested interest in keeping costs down. Cost overrun is a problem many projects experience, but not one that stakeholders will tolerate well. Keep the stakeholder in mind when formulating your cost management plan. They need to stay in the loop and get reports throughout the project.

Project Cost Estimate Template

This free project cost estimate template for Excel lets you list down all the costs related to your project resources such as labor, materials and equipment rental. Once you’ve accurately estimated these costs, you can create a project budget.

project estimate template

Here are some key elements that must be included in a cost management plan:

  • Estimation Methods: Explain which cost estimation method was employed, such as parametric, bottom-up, three-point, etc.
  • Units of Measure: To measure costs accurately, it’s important to establish units of measure for your labor, materials and equipment. Some examples of measurement units can be staff hours, square feet, tons, kilograms, etc.
  • Cost Baseline: Based on your cost estimates, you must define a cost baseline that marks the spending limit for your project.
  • Cost Control Thresholds: Establishing thresholds to monitor cost performance is important. This simply means that when cost variation reaches a certain percentage, the project team will take cost management actions.
  • Performance Measurement Methods: Establish how the cost performance will be measured to see if you’re meeting the goals and expectations of the project. To do so, you’ll need a cost tracking system and earned value management (EVM) techniques.
  • Reporting Guidelines: You need to have a format and communication channels to report your findings as you monitor the project’s progress and present this data to your stakeholders.

Why Is Cost Management Important In Project Management?

The main reason why cost management is so important in project management is that your cost management plan includes the guidelines and procedures needed to stay on budget. This is critical because otherwise, the organization could lose money as costs exceed profits.

The cost management process begins in the planning phase of the project , where costs are estimated and then a project budget is defined. Then, when the project is executed, the expenses are carefully monitored and recorded to make sure that they’re aligned with the budget.

When you have a project budget, it sets a baseline for project costs. That means it governs the decisions and directions you take when managing costs on your project. This helps you keep the project on track without overspending.

The following are some tips to keep in mind as you’re working on managing your project costs.

  • Plan for Inflation: Pricing is not set in stone, and any good budget is going to take this into account by allowing for a range of costs.
  • Account for Natural Disasters or Potential Events: Expect the unexpected might sound silly, but you must have room in your budget for a weather event, personal issue or another unknown that will delay the project.
  • Other Unexpected Costs: Not all unexpected costs are random. There can be legal issues, penalties associated with the project or unexpected labor costs, all of which you can’t budget for, but can inform your budget.
  • Track in Real-Time: Having software to monitor the budget as you execute the project is key for managing costs. However, if you’re looking at data that isn’t current, you won’t be able to act swiftly enough to resolve issues. Therefore, you want to have software with real-time data tracking .
  • Respond Promptly: Regardless of how you discover a discrepancy in your project cost, you must act immediately. The longer you wait, the more money is wasted.
  • Size Accordingly: Some people think smaller projects don’t need project cost management. But small or large, you’ll want to manage costs.

In order to best manage project costs, you have to know your project inside and out. The best way to do that is at the start of the project by creating a thorough project charter .

ProjectManager is online software with the tools you need for cost management planning across all phases of your project. Because our software is cloud-based, project data is delivered in real time so you can immediately gauge the accuracy of your cost estimates against the actual expenditure.

Our resource management feature helps you keep your workload balanced, which reigns in costs. We also have easy-to-use timesheets, where team members can submit with one click and project managers can approve with one click. But, our most powerful feature for cost management is our project dashboard, which tracks project costs in real time so you can keep a close eye on your budget.

ProjectManager’s dashboard cost widget to keep track of cost management

We offer dozens of project management templates to help you manage your projects. Here are some templates to assist you as you go through the cost management process.

Project Budget Template

Our project budget template is ideal to document all your costs and set a baseline for your projects. It can be easily customized to meet the needs of your organization.

Resource Plan Template

You can’t manage costs without solid resource planning. Our resource plan template is the perfect tool to keep track of all the different resources that you’ll need to execute your projects.

Cost Benefit Analysis Template

Projects must be profitable, otherwise, it’s not a good idea to execute them. Before you start a project, make sure you do a cost-benefit analysis beforehand. Our cost-benefit analysis template is a great place to start.

Related Content

  • Cost Benefit Analysis
  • How to Track Project Expenses
  • How to Calculate Cost Variance
  • Tips for Better Cost Control

Learn More About Managing Project Cost

When you’re working on cost management, you’re establishing policies and procedures to manage and control your project costs. Jennifer Bridges, PMP, speaks to the core knowledge you need to know in order to understand cost management on any project in this short tutorial video.

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cost management assignment

What is Cost Assignment?

Cost Assignment

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Cost assignment.

Cost assignment is the process of associating costs with cost objects, such as products, services, departments, or projects. It encompasses the identification, measurement, and allocation of both direct and indirect costs to ensure a comprehensive understanding of the resources consumed by various cost objects within an organization. Cost assignment is a crucial aspect of cost accounting and management accounting, as it helps organizations make informed decisions about pricing, resource allocation, budgeting, and performance evaluation.

There are two main components of cost assignment:

  • Direct cost assignment: Direct costs are those costs that can be specifically traced or identified with a particular cost object. Examples of direct costs include direct materials, such as raw materials used in manufacturing a product, and direct labor, such as the wages paid to workers directly involved in producing a product or providing a service. Direct cost assignment involves linking these costs directly to the relevant cost objects, typically through invoices, timesheets, or other documentation.
  • Indirect cost assignment (Cost allocation): Indirect costs, also known as overhead or shared costs, are those costs that cannot be directly traced to a specific cost object or are not economically feasible to trace directly. Examples of indirect costs include rent, utilities, depreciation, insurance, and administrative expenses. Since indirect costs cannot be assigned directly to cost objects, organizations use various cost allocation methods to distribute these costs in a systematic and rational manner. Some common cost allocation methods include direct allocation, step-down allocation, reciprocal allocation, and activity-based costing (ABC).

In summary, cost assignment is the process of associating both direct and indirect costs with cost objects, such as products, services, departments, or projects. It plays a critical role in cost accounting and management accounting by providing organizations with the necessary information to make informed decisions about pricing, resource allocation, budgeting, and performance evaluation.

Example of Cost Assignment

Let’s consider an example of cost assignment at a bakery called “BreadHeaven” that produces two types of bread: white bread and whole wheat bread.

BreadHeaven incurs various direct and indirect costs to produce the bread. Here’s how the company would assign these costs to the two types of bread:

  • Direct cost assignment:

Direct costs can be specifically traced to each type of bread. In this case, the direct costs include:

  • Direct materials: BreadHeaven purchases flour, yeast, salt, and other ingredients required to make the bread. The cost of these ingredients can be directly traced to each type of bread.
  • Direct labor: BreadHeaven employs bakers who are directly involved in making the bread. The wages paid to these bakers can be directly traced to each type of bread based on the time spent working on each bread type.

For example, if BreadHeaven spent $2,000 on direct materials and $1,500 on direct labor for white bread, and $3,000 on direct materials and $2,500 on direct labor for whole wheat bread, these costs would be directly assigned to each bread type.

  • Indirect cost assignment (Cost allocation):

Indirect costs, such as rent, utilities, equipment maintenance, and administrative expenses, cannot be directly traced to each type of bread. BreadHeaven uses a cost allocation method to assign these costs to the two types of bread.

Suppose the total indirect costs for the month are $6,000. BreadHeaven decides to use the number of loaves produced as the allocation base , as it believes that indirect costs are driven by the production volume. During the month, the bakery produces 3,000 loaves of white bread and 2,000 loaves of whole wheat bread, totaling 5,000 loaves.

The allocation rate per loaf is:

Allocation Rate = Total Indirect Costs / Total Loaves Allocation Rate = $6,000 / 5,000 loaves = $1.20 per loaf

BreadHeaven allocates the indirect costs to each type of bread using the allocation rate and the number of loaves produced:

  • White bread: 3,000 loaves × $1.20 per loaf = $3,600
  • Whole wheat bread: 2,000 loaves × $1.20 per loaf = $2,400

After completing the cost assignment, BreadHeaven can determine the total costs for each type of bread:

  • White bread: $2,000 (direct materials) + $1,500 (direct labor) + $3,600 (indirect costs) = $7,100
  • Whole wheat bread: $3,000 (direct materials) + $2,500 (direct labor) + $2,400 (indirect costs) = $7,900

By assigning both direct and indirect costs to each type of bread, BreadHeaven gains a better understanding of the full cost of producing each bread type, which can inform pricing decisions, resource allocation, and performance evaluation.

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A Quick Guide to the MoSCoW Method Technique

January 12, 2022 - 10 min read

Maria Waida

The MoSCoW method is a prioritization technique used by project and campaign managers to work smarter not harder. In this quick guide, we’ll explain exactly what the MoSCoW method is, how it works, and provide some examples you can use to inform your own analysis. Keep reading to better understand the various categories within the MoSCoW method, as well as an alternative prioritization tool for project managers.

What is the MoSCow method?

The MoSCoW method is a technique used by organizations to communicate the importance and priority of the various requirements being met in various projects. This method is also referred to as MoSCoW prioritization and MoSCoW analysis.

The term MoSCoW is an acronym that refers to the first letter of each of the four priority categories. It uses four categories, which are must-have, should-want, could-have, and will not have. While it’s meant to be used at the start of a project when time is on your side, it can also be adapted to work seamlessly for time constraints .

Software developer Dai Clegg originally created the MoScoW method. Since then, many other leading companies have used it to get their team on the same page, properly distribute resources, and achieve project goals. 

How does the MoSCow technique work?

The MoSCoW technique works by allowing teams to include multiple representatives from the organization in their project management discussions. This gives everyone a wider perspective on the organization's operations and where their collective priorities lie. 

Before you begin your MoSCoW method, think about which people can provide valuable context for your team. They can help you identify opportunities and threats, and they can help you make better decisions. Once finalized, the MoSCoW method will also force stakeholders to show evidence before they can submit additional work requests mid-project. 

Critics of MoSCoW often say that it does not include a comprehensive objective scoring system for all initiatives. This is a common mistake that many teams make. A weighted scoring method will more accurately measure the backlog against a set of predefined benefits and costs.

One of the most challenging aspects of the MoSCoW technique is learning which categories their initiatives should go in.  As the manager, you will need to know which of your team's initiatives are “must haves” for their product or which are merely “should haves”. 

You may even need to solicit feedback from a different department in order to get greater perspective on your current project prioritization. For example, a marketing department head may have greater insight into which selling points for your upcoming product launch are resonating more with buyers so that you can work on perfecting those components first. 

Another key idea about how the MoSCoW technique works is that it’s only effective if you follow it. This means that, once an initiative is placed into a category, the entire team needs to stick to that decision. Many beginner MoSCoW teams end up agreeing that an initiative should have been initiated, but they move on to the next step instead because it feels better or more familiar to them. 

Finally, when it comes to making decisions about prioritization, your team will need to have a consistent framework in place before you engage with this technique. A consistent framework for assessing and ranking all initiatives is critical if you want to avoid biases and falling into old patterns. 

Your team’s prioritization strategy helps set expectations across the organization. It lets them know that they have made the right decisions and weigh all the factors that go into making those decisions. Don’t be afraid to make your MoSCoW method results available to the rest of your organization if applicable. 

Understanding MoSCow prioritization categories

Before the MoSCoW analysis can begin, all participants need to agree on which initiatives will be prioritized. It's important to discuss how to resolve disagreements in order to prevent them from holding up progress during this preparation stage. This can help prevent issues from happening in the first place.

Once the framework has been established, it is time to start identifying the appropriate categories for each project. Here are the definitions and explanations of each of the MoSCoW prioritization categories: 

Musts are defined as initiatives that are critical to the success of a project or product. These are usually non-negotiable and can be used to describe specific functionalities or solutions that need to be implemented.

The “must have” category is challenging to define. Before you start, ask yourself if something is truly necessary in this category.

Should have

Although “should have” initiatives are not essential to a product or project, they may add significant value. A “should have” initiative is different from a “must have” initiative, which means it can be scheduled for a future release.

“Could haves” are initiatives that are not necessary to the core of a product. Projects that are placed in the “could have” category are often the first ones to be deprioritized when another project takes longer than expected.

Will not have

The MoSCoW method places several initiatives in a “will not have” category. This method allows you to manage expectations about what will not be included in a release or another timeframe.

Putting initiatives in the “will not have" category can help prevent scope creep . This category shows the team that the project is not a priority at this specific time frame. 

Some initiatives are prioritized in the “will not have” group, while others are likely to happen in the future. Some teams then decide to create a subcategory for these initiatives.

How is the MoSCoW method used in project management?

The concept of MoSCoW allows project managers to prioritize tasks that can be done efficiently even when they have limited time. For example, if the team has a tight budget, it can use MoSCoW to determine which initiatives can be completed within those limitations. 

This is especially useful for managers juggling more than project or leading cross-functional teams. This is because cross-functional teams are sometimes obligated to another company or department’s priorities. While your team is working on a new product release, another project manager may have them on a tight timeline for another client’s goal. 

And, as we all know, things come up throughout the lifespan of a project. Although efficient planning helps teams remain agile, the MoSCoW method can make even the biggest and most unexpected roadblocks more manageable. 

MoSCoW examples

This method can be used for nearly any industry or project type because it has to do more with project decision-making than the subject matter itself. Here are a couple of MoSCoW method examples you can use to get started with your first draft: 

1. National College of Ireland’s website project

In this example from a lecture on the MoSCoW analysis, Professor Eugene O’Loughlin demonstrates how to use this technique when building a website . 

The project goal in this example is to create a platform where users can securely log in and access files. Because of this, the tasks listed under their MoSCoW categories will look different from other standard website creation projects. 

For example, while another project may add “have an eye-catching design” to their should-have section, this particular website has added “password retrieval” because it directly applies to their security-oriented goal. 

Even if this website project could benefit from a great design, the MoSCoW method helps managers and teams laser focus on completing the highest priority activities first. If they have more time later on, they can potentially add a design improvement task to their “could haves” if they determine the ROI is high enough. 

Takeaway: Consider your project holistically when assigning priority. Your goals should be your north star for determining what is or is not truly important, regardless of what conventional wisdom says to do. 

2. Slideteam’s Assessing HR Requirements Template

This is one of the MoSCoW examples that shows how many different types of tasks this technique covers. Here, we see storing employee leave history as a must, leave letter printing a should, notifications for pending leave dates a could, and remote access a won’t. 

In HR, many of their decisions around prioritization will be made by compliance and legal counsel that they must adhere to. Still, it’s important to define these tasks and their MoSCoW label so that employees understand at a glance that it’s less important to set up leave notifications and more important that they update employment histories in their software. 

Takeaway: The MoSCoW method can be used to cover many different aspects of projects including compliance and procedure. 

How to undertake a MoSCoW analysis using Wrike

Wrike is a project management software that allows users to strategize how they prioritize their portfolio of projects as well as the tasks within each individual initiative. Using visual tools such as road maps that show what progress will look like from kickoff to completion, managers can easily see which of their chosen MoSCoW analysis configurations work best for achieving their goals. 

Wrike also allows you to centralize all of your project planning in one central location. You can view potential resource conflicts across projects, individual task progress statuses, and automate tasks from your should or could have categories that you otherwise wouldn’t have time for. 

Ready to get started with the MoSCoW method and Wrike? Sign up for a two-week free trial today. 

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Maria Waida

Maria is a freelance content writer who specializes in blogging and other marketing materials for enterprise software businesses.

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An Introduction to Bullet Journal Project Management

An Introduction to Bullet Journal Project Management

Bullet journals are great tools to destress and organize various aspects of project management. In this guide, we’re diving deep into the pros and cons of using this method to organize projects of all kinds. Keep reading to discover what bullet journal project management is and how this practice can boost productivity to new levels.  What is a bullet journal? A bullet journal is a customized space to organize all of your personal projects and goals. It can also be used to track deadlines and prioritize tasks. Bullet journaling became popular thanks to the book Getting Things Done, which is about a project management technique that uses a bullet journal to manage different projects efficiently. Bullet journals are often used to create daily, weekly, and monthly project plans. They can also be home to your to-do lists, inspiration boards, and project notes. They’re relaxing to create and relatively easy to maintain.  If you have multiple projects to manage, then you may want to use more than one notebook. Or you can swap your physical journal for a professional services management software that has plenty of space for storing digital plans.  Software tools are also easy to customize, make collaboration easier, and help with turning the plan into reality through task creation and assignment tools. With Wrike, data from multiple users will automatically sync so that everyone is on the same page with new updates and responsibilities.  If you do use a physical journal, using loose leaf paper in a binder will allow you to add pages as you go. This is useful for keeping track of all the data in one place instead of switching to additional notebooks when you run out of room.  There are many elegant, decorated bullet journal page layouts out there. Many invest time into making them artistic with drawings, decorative tape, and cut-out images. This isn’t necessary for project management, but it may be a fun activity outside of work.  Bullet journals can use several different layouts. The most common is a two-page spread that includes a month-long calendar on one page and a breakdown of goals for that period on the other. The latter will help you keep track of all the dates and commitments that are important to you as you get closer to starting a new project. The two-page spread makes it easy to see where you'll be working most efficiently in the coming weeks. It's ideal for people who manage multiple projects simultaneously. You can also create a view of the next six months within your bullet journal project management layout. This is called a future log. A future log is a calendar that lets you keep track of important events and dates for long-term projects. How do you use a bullet journal in project planning? Projects are essentially collections of notes and tasks that are linked to a common goal. They can be pulled together in a bullet journal for you to easily see all of the work related to that specific project. To start, you’ll need to list out your goals.  Create a list that includes every project goal you or your team can think of. Sort them in order of importance. Ideally, these smaller project goals will align with your organization’s big-picture goals.  Once you know what you’d like to accomplish, you can begin your bullet journal. Start by breaking down your number one goal into a project action plan. This can span days, weeks, or months. Then, break down your project action plan into individual tasks. Determine what the task is, who will be in charge of getting it done, and when it needs to be completed.  After that, you’re ready to use your bullet journal for project planning.  Step 1: List out your sections Number your pages if they aren’t already. At the beginning of the bullet journal, write the name of the page on the left side and the page number on the right.  Step 2: Add your key You may use symbols and abbreviations throughout your project planning. Put these at the beginning of the journal either after or on the same page as your key. Use color coding to signify which symbols belong to each project if you have more than one.  Step 3: Write out your future log A future log is a list of key dates and tasks that aren’t part of your immediate three-to-six month plans but are important to keep in mind. Add this after your key and leave space for other items as they come up.  Step 4: Create your calendar This can be in the form of a traditional calendar page. Some people like to hand draw them. However, you can also print, cut out, and paste a blank monthly calendar page into your journal too.  Step 5: Track tasks Create sections for monthly, weekly, and daily task lists. You can organize these in a few ways. Some project managers prefer to do it by project or by person. You can also create one massive list with everything you’re personally responsible for so you have it all in one place. Or use a combination of any of these for your various projects.  Make sure to check in with your bullet journal weekly and monthly. Note any upcoming or past deadlines. Adjust your task list and schedule for unexpected issues as needed.  The benefits of using a bullet journal for work Project managers often have a hard time keeping track of their work activities without losing track of anything along the way. This is one of the reasons why the bullet journal is so useful. Not only does it give you a roadmap of your next projects, but it’s also good for daily use.  You can keep track of to-do lists, priorities, and daily reflections. You can also journal about your progress and realign with goals all in the same notebook or tool. You can also rapidly log your thoughts for the day to boost your creativity and clear out emotions that no longer serve the project.  Combine your bullet journal for work with your personal goals. It will be easier to prioritize and accurately schedule tasks when you have your entire life laid out in front of you on paper.  Another benefit of using a bullet journal for work is that you can either DIY a notebook or use a planner you already have. It’s not so much what you use but how you use it.  And bonus: bullet journaling only takes five to 15 minutes a day. Whether it’s reviewing tomorrow’s meetings or crossing off today’s tasks, a bullet journal practice is easy to build into your schedule no matter how busy you are.  The disadvantages of using a bullet journal in project management While bullet journaling project management is great for keeping track of key project details, many project managers need a separate system to manage their meetings and reports.  Having more than one journal or calendar to manage at one time can be confusing. Add more than one project to the mix, and it may be counterproductive to use a traditional pen and paper bullet journal to accomplish your goals.  Another disadvantage of using a bullet journal in project management is your lack of ability to collaborate with others. When writing on paper, you have to either show your team the notebook in person or scan the pages and share them online. Either way, it’s not ideal for large, remote, and/or revolving teams.  The other thing to know about bullet journaling before diving in headfirst is that it can be quite time-consuming. If you do a crafty layout with calligraphy and scrapbooking accessories, then it may even take several days to finish.  And once you do have your plans laid out, they can be hard to change. Rewriting, erasing, and making more space for things that come up are essential for project planning. For that reason, we suggest using an 11 inch by 7 inch grid lined notebook to give yourself extra space.  Also, you can outline headlines and calendars with a pen or marker if you like the look. But stick to pencil for any factual information that is subject to change throughout the lifetime of the project. If you don’t do this now, you may end up having to scrap entire pages and start over later on.  Bullet journal alternatives you should consider Bullet journals are fun, unique, and creative. But there are some projects where they just aren’t the best possible option for managing it all. The project may be too complex or too large for a single notebook. There may even be so many updates needed that a physical notebook doesn’t make sense for your project.  If you’re facing any of these issues, you can try any of the following bullet journal alternatives:  Digital calendar and list app combo Bulletin board, sticky notes, and shared files Project management software Project management software is the top choice for bullet journal alternatives. Not only is it flexible, but it can make project planning more productive.  Wrike is the ultimate platform for customizing your own bullet journal project management processes. With over 30 predefined apps you can use to sync all your project data in one place, it's the most versatile platform for managing complex tasks. As a single source of truth for a project, team, and entire organization, project management software offers more advanced features than a simple notebook can. Instead of writing everything down on a few sheets of paper, Wrike acts like a living document. And unlike other digital organization tools, Wrike is specifically built to optimize project performance and success.  Wrike's tools are designed to work seamlessly with any team. Anyone who has permission to access the project can share files and tasks quickly and easily. Once uploaded, collaborators can visually edit and obtain files.  They’ll also have access to reports and tasks that are simple to understand at a glance without losing the details in the process. This allows all managers to gain visibility across departments and groups. Wrike is the ideal solution for teams that want to grow and operate efficiently with the help of cutting edge technology. For example, Wrike’s Work Intelligence helps you get started with the next generation of work, with AI-powered projects and automation. Wrike also features a streamlined UI that lets you customize its features to work seamlessly with your team. Although bullet journaling allows you to customize your project planning, you’ll be able to get and implement feedback from partners faster with a digital project tool.  Here are some other stand out benefits of using a project management software over a physical or digital bullet journal:  It’s interactive. For example, Wrike offers Gantt charts that lets users visualize their plans and progress. It’s efficient. Kanban boards make it easy to work seamlessly with Agile teams by creating and sharing whenever needed.  It’s faster. Wrike's template library is designed to help you quickly create and manage complex projects. It’s customizable. With custom request forms, you can easily gather details for your intake, assign tasks to the right teams, and dynamically route questions and requests. It’s up to date. Wrike’s calendars are ideal for team members who want to keep up with the latest information. It’s repeatable. Most tasks go through the same steps before they are finished. In a project management solution, you build a path for yours that will automatically assign and notify people when it's ready to begin through Wrike’s Automation Engine.  It’s trackable. With timers, approvals, and visual task assignments, you can manage entire teams while streamlining your work. It’s transparent. Get a 360 view across all of your organizations with custom dashboards. It’s syncable. Wrike's 400+ app integrations make it possible to integrate hundreds of apps into one central hub.  It’s safe. A digital project management software can safeguard your data by enforcing rules and encryption key ownership. Ready to upgrade your project planning methods and tools? Check out Wrike’s two-week free trial for some more goal-achieving features. 

What Is The Pomodoro Technique and How Does it Work?

What Is The Pomodoro Technique and How Does it Work?

Endless tasks and expectations from colleagues and employers can make getting things done hard. There’s always something else to add to your to-do list and, as that list grows, it starts to feel like there’s never enough time to do it all. Productivity hacks can seem gimmicky and semi-helpful at best. But what if there was a time management strategy that could help you tackle your to-do list, meet others’ expectations, and help you feel more productive and balanced?  That’s where the Pomodoro Technique comes in. This popular time management strategy can help you better plan your workload, overcome distractions, and check tasks off your list. And it doesn’t require working overtime or jamming more work into your day. Instead, it encourages frequent breaks in between stints of work. Perhaps one of the best aspects about it is that it’s easy to use.  We’re here to help you make your workdays better and more productive. In this guide, we’re breaking down the Pomodoro method — how to use it, why it works, and its advantages and disadvantages. And don’t worry, we’ll cover what Pomodoro means while we’re at it. Add reading this guide to your list of to-dos for today, and let’s get started.  What is the Pomodoro Technique? The Pomodoro Technique is a productivity or time management method created in the early 1990s by Francesco Cirillo.  A university student at the time, Cirillo struggled to focus and get his assignments done. Feeling overwhelmed, he realized he needed to try a new way of working and held himself accountable for committing to 10 minutes of focused time while studying. As he committed to the challenge, he found a tomato-shaped timer (you guessed it, Pomodoro is “tomato” in Italian), and the Pomodoro Technique was born. Cirillo wrote an entire book about the Pomodoro Technique, but the gist of it is simple. The method encourages short bursts of manageable chunks of work with breaks built in between. With this method, you work for 25-minutes sessions separated by five-minute breaks. After every four or five Pomodoros (think of these as work sessions), you indulge in a more extended break for 15-20 minutes. With a sense of urgency built into it, the method forces you to think through your to-do list and eliminate distractions while progressing on your tasks for a limited amount of time. And you can eliminate distractions knowing that you have breaks built into your day to look forward to. Let’s start by understanding what exactly the word “Pomodoro” means and where it came from. What does Pomodoro mean? Pomodoro quite literally means “tomato” in Italian. But what does a tomato have to do with time management?  Like we mentioned earlier, Cirillo used a tomato-shaped timer to help him manage his focused work time. He later named his famous technique after the tomato-shaped kitchen timer that helped him do his best work.  When we talk about the Pomodoro Technique, a Pomodoro also refers to one 25-minute focused work session. You’ll use a timer to work for one Pomodoro. Get it? Don’t worry — we’ll walk you through the nitty-gritty of how to use the Pomodoro Technique next.  How to use the Pomodoro Technique One of the best parts of the Pomodoro Technique is that it’s super simple to use without any training. Depending on who you ask, these steps may vary slightly. But that’s one of the best parts about the method — you can customize it.  Here’s how Cirillo’s Pomodoro method works: 1. Make a list of the tasks you need to accomplish To make the best use of your Pomodoro sessions, consider starting your day by creating a to-do list and outlining the tasks you need to accomplish. Don’t panic if your list becomes lengthy! Remember, you’re going to split up your work so that it’s more manageable throughout the day. You just need to make a note of what you need to accomplish today.  Tip: When you make a list of your tasks, think about how much time you need to complete each task. For example, one task might take you a full 25-minute Pomodoro. Or you might have three short tasks that you can group during one Pomodoro. Write down how many minutes each task will take. That way, you can pair up tasks that will take less than 25-minutes to complete. Your estimations don’t have to be perfect, but you want to avoid having gaps of time to fill or going past time during your Pomodoro sessions. 2. Set a timer for 25 minutes You don’t have to mimic Cirillo exactly and use a tomato-shaped kitchen timer, but to live the complete Pomodoro Technique experience, give a real timer a try. It doesn’t matter if you use a virtual or physical timer; any will do. Here are a few options to choose from when selecting a Pomodoro Technique timer: Pomodoro tomato timer Online tomato timer Focus Keeper app Pomodoro Timer Lite app The timer you use doesn’t need to be overly cumbersome or have any fancy capabilities, so don’t get caught up in the details. Keep it simple to make it most effective.  3. Focus on your tasks until the timer goes off This is the tricky part. Once you’ve set your timer, you need to work on the task or tasks you’ve chosen for 25 minutes without any interruptions throwing you off track. Combating distractions is no easy feat, and it may take practice to nail this step.  Tip: If possible, alert those around you when you’re using the Pomodoro method. This can help reduce interruptions and external distractions.  If you find yourself with spare time during a Pomodoro and aren’t sure what to focus on, Cirillo recommends taking advantage of the opportunity for overlearning. Use the time to make improvements and tidy up your work, reflect on the tasks you completed, or make a note of what you’ve learned until the timer goes off. Use the 25 minutes as best you can and avoid starting your break early if possible. 4. Enjoy a short break for five minutes You made it! Time is up and you can enjoy a break for five minutes or so. Consider using this time to use the restroom, grab a snack, or fill up your water bottle. Give your eyes a break and try to limit screen time if you can. Get up and stretch your legs or move your body around. Taking care of your well-being will help you stay motivated throughout the remainder of the day. 5. Repeat steps the first four steps Are you getting the hang of it? Rinse and repeat the above steps. After you’ve completed four Pomodoros, skip step four and jump straight to step six. 6. After every four or five Pomodoros, enjoy a more extended break You’ve earned it! Enjoy a longer, restorative break this time. Take 15-20 minutes to rejuvenate yourself. Maybe it’s time for breakfast or lunch. Or perhaps you want to spend a few minutes outside in the sun. Whatever the case may be, use your break wisely and prepare to jump into more Pomodoros after the break. That’s it. The Pomodoro Technique is an easy-to-use system, which means there isn’t much of a learning curve to start using it to your advantage. Does the Pomodoro Technique work? It sounds simple, right? That means you might be asking yourself whether the Pomodoro method truly works or not.  Reviews of the method spread amongst the internet suggest that many have seen success when using the technique. One person found that the Pomodoro Technique was a great solution for monotonous tasks on the to-do list. Knowing that they only needed to work on a task for 25 minutes encouraged them to get started on those dreaded, tedious to-do’s. Another person found success using the Pomodoro Technique and later adapted the method to fit their specific needs. The Pomodoro Technique helped them define a practice of self-discipline to expand on and boost productivity.  But what is it about the Pomodoro Technique that makes it work? Studies suggest that brief mental breaks help keep you focused. Frequent distractions rob us of productivity at work, but the Pomodoro method helps eliminate distractions for more focus in the workplace.  As with any time management strategy, what works best for some may not work well for others. Give the Pomodoro Technique a try and tailor it to your individual needs to ensure it has the most payoff for you.  The advantages and disadvantages of the Pomodoro method As with any time management strategy, the Pomodoro Technique has both benefits and drawbacks to consider before experimenting with it. Let’s take a look at both, starting with the advantages. Advantages of the Pomodoro Technique Break the habit of multitasking  When you follow the Pomodoro Technique, you’ll break the habit of multitasking. While multitasking might seem like a great way to get more done, it’s distracting and actually hinders your productivity. With the Pomodoro method, your goal is to dedicate your focus to any given task at hand — and save the rest of the items on your to-do list for another Pomodoro.  Reduce or prevent feelings of burnout Looking at your neverending to-do list can feel overwhelming and stressful, and working through that list without a strategic plan in place can cause feelings of burnout. The Pomodoro Technique not only encourages frequent breaks but it builds them directly into your schedule for you. You can reduce or prevent stress and burnout by taking full advantage of your breaks when you have them. Reduce procrastination We all procrastinate now and then, but the Pomodoro Technique ignites a sense of urgency in the day, which reduces or eliminates procrastination. There isn’t any time to scroll through your favorite social media platform, grab another snack, stare out the window, or engage in another distraction when you know you only have 25 minutes to complete a task. (Don’t beat yourself up — we’re all guilty of these things!) Disadvantages of the Pomodoro Technique Some tasks take more than 25 minutes  The Pomodoro method is said to be beneficial for tasks like writing, coding, and studying. It also comes in handy when needing to work through some monotonous to-dos like cleaning out your inbox or digging into some administrative items. But some tasks are bound to take more than 25 minutes to complete, which means the Pomodoro Technique may not always work for every type of project or task. If you’re in the middle of a project and are in a solid flow state, you might want to keep working past the 25-minute timer mark, which will interrupt all subsequent Pomodoro scheduling. You know your work styles and productivity best, so you’ll be in charge of making the judgment call on whether you need to work past the timer’s buzz.  Meetings could interfere with your Pomodoro planning  The Pomodoro method sounds particularly beneficial to those who have full control over their schedules. But many career professionals are bound to be interrupted by planned and unexpected meetings. Your meeting schedule could interfere with how you plan your Pomodoros or could interrupt you in the middle of a Pomodoro session.  Every time management strategy comes with advantages and disadvantages, and no method is guaranteed to be one-size-fits-all. Since the Pomodoro method is easy and comes without cost, consider giving it a try to see if it works for you. Remember, you can always tweak it to suit you best.  How to use Wrike to plan your Pomodoros  To set yourself up for success when using the Pomodoro Technique, you’ll want to have a to-do list prepared. A project management tool like Wrike can help you organize your tasks so that you can dive right into your Pomodoros (without wondering what you should start with).  With Wrike, you can: Manage and prioritize your work Use templates to organize and break your projects down into manageable tasks Track your time to understand how you’re spending it Manage workloads with resource management capabilities  You’re on your way to a more productive workday. Start your free trial of Wrike and begin planning your Pomodoros today.

Moore’s Law and the Productivity Problem

Moore’s Law and the Productivity Problem

As the year draws to a close, developing strategies for how to be more productive and finish the year off strong is on every team’s mind — regardless of department or industry.  According to a study by California-based management platform Redbooth, the month of the year that we are at our most productive is October, followed by November, then September. The fall provides a feeling of a new start for many businesses, with the desire for shiny new productivity tools and aids bringing us back to our school days. But, while a new pencil case or a multi-colored pen can work wonders, today’s organizations are looking to much more sophisticated tools to boost their productivity. Note-taking apps, instant messaging platforms, virtual to-do lists, calendar tools — our desktops are overflowing with software designed to make us our most productive selves. But, with so many conflicting apps clouding our vision, it can often be difficult to get anything done at all.  So, why are we so inclined to constantly invest in new technology, believing it will exponentially increase our productivity levels? This concept is commonly referred to as Moore’s Law, and it’s important to understand it if you’re concerned about your team’s or your own productivity levels. What is Moore’s Law? Let’s start off with a simple enough question: what is Moore’s Law? The origins of Moore’s Law lie in IT and computer hardware. It is the principle that the speed and efficiency of a computer can be expected to double every two years, while the cost decreases by half. Moore’s Law is named after Gordon E. Moore, the co-founder of Intel, who made this observation of exponential growth in 1965.  You will have no doubt experienced Moore’s Law for yourself over the last decade, as the need to purchase a new phone or laptop normally begins to creep up every two years or so. While the technical capabilities of your gadget will have grown hugely, the price largely remains standard. We then begin to fall into a cycle of purchasing new technology as a habit, stretching our view to include phones, computers, exercise aids, entertainment systems, and, yes, productivity tools. Moore’s Law and endless productivity tools Of course, Moore’s Law has huge benefits for the technologically-driven society that we live in. The standards of the technology that we rely on can even be linked to Moore’s Law. The overarching idea of Moore’s Law — that speed, efficiency, and cost-effectiveness of technology is constantly evolving at a rapid pace — could apply to productivity tools and solutions. The need to update and reinvest in the ever-growing ecosystem of productivity tools and software every few years sees many teams losing themselves to too many apps.  In 2015, the average number of cloud applications per company was 73. In 2020, that number had increased to 163. So much so, that 56% of IT executives are now reporting having to use manual spreadsheets to keep track of all their SaaS apps — defeating their productivity goals before they’ve even started. This concept is commonly known as ‘SaaS sprawl,’ a term that refers to the dilemma of an organization’s tech stack being so expansive that it becomes unmanageable and causes visibility problems across departments. $40 billion is estimated to be spent on unused software each year, and the number of apps we are downloading continues to rise.  Many teams believe themselves to be more productive than ever, when really, spending so much time flicking between apps, tools, and software stifles creativity and raises burnout to an all-time high. How your team can effectively invest in productivity If your organization has fallen foul to overindulgence in productivity tools and gadgets, don’t worry. There are plenty of ways to empower your teams and teach them how to be more productive without overwhelming themselves with dozens of productivity platforms.  Consider toxic productivity The concept of toxic productivity relates to an unattainable desire for increased productivity, at the expense of other priorities, such as family or health. Toxic productivity is a real issue for many teams, especially if both our personal and work devices are overrun with technology that is constantly drawing us back to working mode. Consider whether your team could benefit from a digital detox of work-related technology, and set boundaries for after-hours work communication. Turn your attention to other methods of increasing productivity There are plenty of ways to increase productivity and wellbeing at work that have nothing to do with technology. For example, has your organization invested in a flexible work structure, allowing employees to choose where they work best? Could your business go the extra mile and trial a four-day workweek? Could your employee recognition programs use some extra love? These are all areas to consider when brainstorming how to be more productive across the board. Making the most of all-in-one technology like Wrike Of course, technology will always be a cornerstone of a successful business, and continuing to use productivity tools in some way at work is non-negotiable. But which tools should you invest in? What are the most important features of work management software that can actually increase productivity by up to 40%? Workflow automation: With Wrike’s custom request forms and automated task assignment, your team will never miss important tasks and details because of a cluttered workspace. App integration: Using so many apps can be tiresome and inefficient, with details and updates often being missed by team members. Wrike’s work management includes over 400 app integrations, so the constant context switching can stop. Single source of truth: Trawling through emails and messaging apps to find important documents and updates is time-consuming and frustrating for teams. Keeping everything organized in one centralized hub, where users can comment, edit, and give feedback, is a life-saver for teams who wish to be more productive. Collaborative features: Whether your team works in-office, remotely, or under a hybrid model, breakdowns in communication are one of the most common challenges to successful projects. Wrike’s collaborative features, including @mentions, real-time editing, and email and chat app integrations means that your team all have the same view, no matter where they are. Want to know more about how Wrike can boost your team’s productivity? Try out a free two-week trial today.

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MoSCoW Method of Prioritization

MoSCoW Method - toolshero

MoSCoW Method: This article explains MoSCoW Method in a practical way. Next to what it is (meaning, acronym and origin), and which advantages are connected to using this model, this article also highlights the MoSCoW Method requirements, including a practical example. You will also learn how applying this method will enable you and the team to reach deadlines in time. Enjoy reading!

What is the MoSCoW Method of Prioritization?

Prioritising is often challenging. Particularly when it comes the implementation of new ideas and / or technologies. Everyone in an organisation always wants everything to be done right away and that is practically impossible. There are several tools available to make prioritisation easier. The MoSCoW Method of Prioritization is one them.

The MoSCoW Method is a prioritization technique, which can be used in a variety of situations.

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Origin and advantages of the MoSCoW Method

The method was developed by  Dai Clegg, a developer working for the software company Oracle . Originally, it was used to categorize product features, derived from user stories. It was later used in the Dynamic System Development Method (DSDM) . The method contains multiple prioritization categories, with labels for each requirement, making it easier to prioritise.

Even though the origin of this prioritize method is in software development, it is also highly applicable for agile project management, market launches, product releases, starting a new business or change processes.

With the MoSCoW Method, requirements are determined for the result of the project or product. It is about setting requirements by order of priority. The most important requirements need to be met first for a greater chance of success.

Meaning and acronym of the MoSCoW Method

Moscow is an acronym made up of the first letters. The two Os have been added to make the word ‘moscow’ readable, they don’t have any meaning themselves. The M stands for ‘Must haves’ , S for ‘Should haves’ , C for ‘Could haves’ and W for ‘Won’t haves’ or ‘Would haves’ .

MoSCoW method acronym - Toolshero

Figure 1 – the MoSCoW Method acronym

The requirements when you start with the MoSCoW Method

It’s a good idea to first specify the requirements together with all team members before starting the MoSCoW Method. When determining the requirements, you should take into account what is important to all the stakeholders. Brainstorming with everyone involved will lead to good, qualitative requirements.

The requirements are prioritised to prevent them from becoming to expensive or unrealistic. The main goal is to come up with requirements that add the most value for the company. The project requirements are divided into one of the following categories:

M – Must haves

These are about the minimal requirements that are determined in advance that the end-result has to meet.

Without meeting these requirements, the project fails and the product won’t be use-able. They are a necessity for a workable product and there is no alternative. The ‘Must haves’ are essential. MUST is also explained as an acronym that stands for Minimum Use-able SubseTs.

As an extra exam assignment, University of Applied Sciences Automotive students have been asked to design a car that can at least drive (minimal requirements).

It’s okay if the car only has a chassis, without any bodywork. It’s about the construction of the individual parts and drive train to the combustion engine. In this case, the Must have is that they have a drivable car by the end of the academic year.

S – Should haves

These are additional and much desired requirements that have a high priority, but are not essential for a usable end product. The product will be usable even if these requirements aren’t met. When they are met, they will only add to the value of the product. Depending on the available time, you can always return to these requirements at a later time.

The University of Applied Sciences Automotive student might like to add a tow bar to the car (should have), but as long as the car can drive without the tow bar, their project will be successful. They can always add the tow bar at a later stage.

C – Could haves

These requirements can be considered if there’s time left. If not, it’s no problem and will not have a negative effect on the final result. The ‘Could haves’ have a lower priority than the ‘Should haves’ .

This option will only be included if there really is more than enough time to make it work. This category is also referred to as ‘nice to have’; they’re more a wish than an absolute requirement.

The University of Applied Sciences Automotive students would perhaps like to install a tachometer in the car. It’s not an important (exam) requirement, but it’d be great if they manage to do it.

W – Won’t haves (and would haves)

These are about wishes for the future that are often impossible to realise or cost a lot of time. If it’s simply not possible, it’s best not to waste any energy on it.

If it is achievable, then a lot of time (and money) will have to be invested and it’s labelled a ‘Would have’. ‘Would haves’ are often followed upon at a later stage after the initial project is finished.

The University of Applied Sciences Automotive students don’t have to make a car that will actually drive on public roads.

It’s meant for study. If they do want to take it on public roads, it will need bodywork and comply with safety standards. It also involves getting approval from the Vehicle Standards Agency in elaborate process.

How to reach deadlines using the MoSCoW Method of Prioritization?

Correctly applying and sticking to the MoSCoW Method will lead to a clear way to lead a project. Everyone involved with the project will know what needs to be done first, when it has to be finished and why it’s important. By assigning priorities to requirements, a project becomes more manageable and it’ll be easier to meet the deadline.

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It’s Your Turn

What do you think? How do you apply the MoSCoW analysis in your project or organisation? Do you recognize the practical explanation or do you have more additions? What are your success factors for applying the MoSCoW Method?

Share your experience and knowledge in the comments box below.

More information

  • Baxter, R. (2004). Software engineering is software engineering . In 26th International Conference on Software Engineering, W36 Workshop Software Engineering for High Performance System (HPCS) Applications (pp. 4-18).
  • Stephens, R. (2015). Beginning Software Engineering . Wrox Publishing .
  • Hatton, S. (2008). Choosing the right prioritisation method. In Software Engineering, 2008. ASWEC 2008 . 19th Australian Conference on (pp. 517-526). IEEE.
  • Robson, W.A., Simon, Shena. (2014). Moscow in the making . Taylor & Francis Ltd.

How to cite this article: Mulder, P. (2017). MoSCoW Method of Prioritization . Retrieved [insert date] from Toolshero: https://www.toolshero.com/project-management/moscow-method/

Original publication date: 05/12/2017 | Last update: 05/31/2023

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Patty Mulder

Patty Mulder

Patty Mulder is an Dutch expert on Management Skills, Personal Effectiveness and Business Communication. She is also a Content writer, Business Coach and Company Trainer and lives in the Netherlands (Europe). Note: all her articles are written in Dutch and we translated her articles to English!

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One response to “moscow method of prioritization”.

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Thanks for providing a concise and easily understandable explanation. The one thing that stood out to me however, is the example for the Should Have section. Tow bars are clearly “Could have” at best and in this situation would probably end up in the “Won’t have” bucket simply because there’s no justification for them at all on an experimental vehicle that will not be driven on a public road. To make this more believable I’d recommend changing the example for “Should Haves” to either: Seats – the vehicle should have a seat for the driver but as long as someone can drive it somehow it’s not critical. Or Steering Wheel – ideally the vehicle should have a steering wheel, but as long as it CAN be steered (perhaps by levers) then the project will pass. Otherwise, this is a really useful article. Thanks again.

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General election latest: Andrea Leadsom joins Michael Gove as latest Tory MP to announce departure at general election

The number of Tory MPs standing down continues to rise, as Rishi Sunak and Sir Keir Starmer hit the general election campaign trail once more.

Saturday 25 May 2024 05:00, UK

  • General Election 2024

Please use Chrome browser for a more accessible video player

General election called for 4 July

  • Housing Secretary Michael Gove to stand down at general election
  • Andrea Leadsom to quit parliament at election as Tory exodus continues
  • 'Bionic MP' Craig Mackinlay won't contest seat
  • Sunak doesn't rule out Johnson joining Tory campaign
  • Starmer tells Sky News Sunak 'sounding a bit desperate' over TV debates
  • Comments come after Tories accused him of being 'spineless'
  • Live reporting by Ben Bloch and (earlier)  Faith Ridler

Expert analysis

  • Beth Rigby: Starmer may have launched in Scotland but he needs to keep his base
  • Sam Coates: Gove stepping down shows the political winds are shifting
  • Sophy Ridge: This is what the Tories don't want to talk about

Election essentials

  • Trackers: Who's leading polls? | Is PM keeping promises?
  • Subscribe to Sky's politics podcasts: Electoral Dysfunction | Politics At Jack And Sam's
  • Read more: What happens next? | Which MPs are standing down? | Key seats to watch | How to register to vote | What counts as voter ID? | Check if your constituency's changing | Sky's coverage plans

Rishi Sunak has called a general election for this summer.

The prime minister has been saying for months he would call a vote for the "second half of the year", and he has now confirmed it will be on 4 July.

Parliament will be prorogued later  today  - which means that will mark the formal end of this session of parliament.

On  Thursday, 30 May , parliament will formally be dissolved.

This means that members of parliament cease to be members of parliament, and become candidates in the election - or not, if they are standing down.

The campaign will then take place ahead of polling day on  Thursday, 4 July , when polls will close at 10pm.

Following the vote, the new elected MPs will travel to London to meet in parliament for the first time on  Tuesday, 9 July .

The Speaker of the House of Commons will be elected and MPs will be sworn in.

The formal state opening of parliament and a King's Speech will take place on  Wednesday, 17 July .

Our political reporter Alix Culbertson explains more below...

In January 2023, Rishi Sunak made five promises.

Since then, he and his ministers have rarely missed an opportunity to list them. In case you haven't heard, he promised to:

  • Halve inflation
  • Grow the economy
  • Reduce debt
  • Cut NHS waiting lists and times
  • Stop the boats

See below how he is doing on these goals:

By  Alexandra Rogers , political reporter

Labour's shadow education secretary has been criticised for refusing to rule out an increase in university tuition fees if the party wins the general election.

The National Union of Students (NUS), which represents university and college students across the UK, said a potential rise in tuition fees would "hamper their future" and that loan debt was already "unsustainable".

Bridget Phillipson said during a BBC Question Time debate on Thursday evening that UK universities were facing "enormous challenges" and the question of how they would be funded did not have any "straightforward" answers.

She said the decade-long freeze on tuition fees, which has set them at about £9,000 per year, meant universities across the country were "increasingly struggling to cover the cost of tuition".

But pressed by fellow panellists whether she would rule it out, the shadow education secretary did not answer.

Read more here:

By Professor Michael Thrasher, Sky News election analyst

The electoral geography of the UK is changing.

Following the recommendations of independent Boundary Commissions for England, Scotland, Wales and Northern Ireland, the next UK general election - which Sky News understands will be on 4 July - will be fought on new constituency boundaries, replacing those in operation since 2010.

This is the sixth periodic review to be implemented since the war. The next review is not scheduled until October 2031.

Exploring how this movement of voters affects the political makeup of the House of Commons is a task that Colin Rallings and myself have been doing over the past thirty years following previous boundary adjustments.

There are winners and losers in different parts of the UK - read the full analysis here:

With the general election campaign officially under way, what better time to keep a close eye on the latest polling?

The Sky News live poll tracker - collated and updated by our Data and Forensics team - aggregates various surveys to indicate how voters feel about the different political parties.

See the latest update below - and you can read more about the methodology behind the tracker  here .

We've got three key dates for your diary from the Electoral Commission should you need to register to vote in the general election.

18 June: This is the deadline to register, which you can do online at gov.uk/register-to-vote .

19 June: This is the deadline to apply for a postal vote, should you not be around when polling stations open on 4 July.

26 June: This is the deadline to apply for a proxy vote, which allows someone to vote on your behalf, and also to apply for a Voter ID certificate should you not have another valid form of identification.

This is the first general election where ID is needed to vote - find out more about registration here:

The latest edition of Electoral Dysfunction  is in your podcast feeds now, and one of the main topics was the optics of Rishi Sunak's announcement of the general election date.

In case you missed it, he went out on to Downing Street in the pouring rain, and throughout his speech, the song Things Can Only Get Better by D:Ream was blaring out - which was the official anthem of Sir Tony Blair's landslide victory for Labour in 1997 ( more here ).

Our political editor Beth Rigby  explained that Mr Sunak did the announcement on the street because he "wanted to be traditional".

But former Scottish Tory leader Ruth Davidson  branded the launch "disastrous", saying: "The idea of tradition and all the rest of it, well, that's great and all.

"But you're the prime minister - you make the traditions here.

"How f****** incompetent do you have to be to launch a campaign that badly?

"And how much do you not protect your boss by allowing him to do it or encouraging him to do it?"

She added: "Wait for a break in the clouds, okay? Look, how hard is that?"

Jess Phillips , Labour MP for Birmingham Yardley said he wanted to avoid advertising that he is a centi-millionaire by having "a lackey holding an umbrella".

She added that he "wouldn't have lost a single vote" if someone had been holding an umbrella, or he'd delivered the speech inside.

"He will lose votes because of the way he launched it," she said.

👉 Listen above then tap here to follow Electoral Dysfunction wherever you get your podcasts 👈

Email Beth, Jess, and Ruth at [email protected], post on X to @BethRigby, or send a WhatsApp voice note on 07934 200 444.

Sir Keir Starmer's tour of key battlegrounds kicked off in Scotland on Friday. His message was singular: change. And his target was singular, too: take out the SNP.

In four elections on the bounce, Labour has been nearly wiped out in Scotland by the SNP. In 2019, the party returned one MP to Westminster from Scotland. It now has two. The task in this election campaign is to turn that into dozens.

"This is an election about change, and Scotland's voice is vital. It needs to be a leading voice," he said in a slick campaign event with hundreds of people holding up "change" placards and cheering Sir Keir and Scottish Labour leader Anas Sarwar on.

"Send a message, send a message: that is the height of the SNP's ambition, to send a message of protest to Westminster. I don't want Scotland to send a message. I want Scotland to send a government. A Labour government."

Ask Labour strategists, and they say Scotland is vital to get Labour over the line to a majority because of how far behind Labour were in England back in 2019. They are operating a twin attack on two failing governments - the SNP one in Holyrood and the Conservative government in Westminster - to implore voters to switch back from the SNP to kick the Tories out.

Starmer told me in Glasgow that winning in Scotland was important numerically but also to him personally, because he wants to be a prime minister, should Labour win, that governs for the whole of the UK.

Read Beth's full analysis here...

By Sam Coates , deputy political editor

Rishi Sunak has admitted having "difficult days" as he claims he's pumped for the campaign and is going to win.

Speaking to travelling reporters on the flight from Belfast to Birmingham, the prime minister insisted he was "up for the fight" in this campaign and is "absolutely" enjoying it.

Asked if he was going to win, he said: "Damn right."

The prime minister stunned the nation and his party after his decision to call an election on Wednesday, and immediately embarked on an opening campaign tour of all four nations of the United Kingdom.

However, he gave a glimpse about the challenges he has felt while speaking to broadcasters on the flight.

Read more from Sam here:

By Alexandra Rogers , political reporter

Conservative MP Caroline Nokes "jokingly" confronted Labour's Wes Streeting over allegations he is behind rumours she has considered defecting to Sir Keir Starmer's party.

A friend of Ms Nokes, who has been the Tory MP for Romsey and Southampton North since 2010, said she "took him to task" over the claims that have recently appeared in the media.

The source told Sky News: "Caroline took him to task for spreading these rumours.

"Caroline has only ever been in one party and is Tory to her core," they said.

Referring to Mr Streeting's past role as the president of the National Union of Students before he entered Westminster, the source added: "Wes needs to realise he's not running the student union anymore!"

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cost management assignment

COMMENTS

  1. The Ultimate Guide to Cost Management

    Financing and Funding: The process of requesting, authorizing, and receiving money for a project. Cost Management: The general practice of overseeing project expenditures and making cost-related decisions throughout the project life cycle. Controlling: Addressing cost variations to avoid cost overruns.

  2. Project cost management: Definition, steps, and benefits

    Cost management is the process of estimating, budgeting, and controlling project costs. The cost management process begins during the planning phase and continues throughout the duration of the project as managers continuously review, monitor, and adjust expenditures to ensure the project doesn't go over the approved budget.

  3. How to Make a Cost Management Plan

    It is typically made up of four steps: resource planning, cost estimation, budgeting and cost control. It's strongly recommended that you use project planning software to assist you in the process of creating a cost management plan, as there will be many tasks, costs and resources to track. 1.

  4. PDF Project Cost Management

    The cost management processes and their associated tools and techniques are usually selected during the project life cycle definition (read Sec. 2.1), and are documented in the cost mgmt. plan. Life Cycle Costing It is defined as the cost of using, maintaining & supporting the product,

  5. Assign access to Cost Management data

    You can assign the Cost Management Reader (or reader) role to a user at the resource group scope. For more information, see Assign Azure roles using the Azure portal. Cross-tenant authentication issues. Currently, Cost Management provides limited support for cross-tenant authentication.

  6. Master Cost Management Planning: Templates, Best Strategies ...

    1. Budget effectively: A cost management plan facilitates accurate cost estimation, allowing project managers to allocate resources appropriately. It helps in determining the financial feasibility of the project and ensures that sufficient funds are allocated to each phase. 2.

  7. Cost assignment definition

    What is Cost Assignment? Cost assignment is the allocation of costs to the activities or objects that triggered the incurrence of the costs. The concept is heavily used in activity-based costing, where overhead costs are traced back to the actions causing the overhead to be incurred. The cost assignment is based on one or more cost drivers.. Example of a Cost Assignment

  8. Introduction to Cost Management

    Managing the costs in a business are crucial to success. There are many different ways to classify costs, which will be discussed in this module. When we discuss costs from a managerial accounting standpoint, the same cost may be classified differently depending on what information is needed. Being aware of the different cost classifications ...

  9. 7.13: Introduction to Cost Management

    What you'll learn to do: Discuss the importance of cost management. Managing the costs in a business are crucial to success. There are many different ways to classify costs, which will be discussed in this module. When we discuss costs from a managerial accounting standpoint, the same cost may be classified differently depending on what ...

  10. Cost Allocation

    Cost allocation provides the management with important data about cost utilization that they can use in making decisions. It shows the cost objects that take up most of the costs and helps determine if the departments or products are profitable enough to justify the costs allocated. For unprofitable cost objects, the company's management can ...

  11. What is Cost Management? Definition, Steps and Benefits

    Cost management is the process of planning and controlling the budget of a business. Having a good cost management system in place makes it easier for an organization to estimate and allocate its budget. Cost management is a form of management accounting that helps a business reduce the chance of going over budget with more accurate forecasts ...

  12. Project Cost Management Basics

    Effective cost management requires the right software. ProjectManager is the perfect tool to track project costs, resources and workload. Our Gantt charts, project calendars and timesheets allow you to manage costs, time and tasks in one place. Get started for free. Keep project costs under control with ProjectManager's dashboards.

  13. (PDF) Project Cost Management

    This book series includes 11 books providing coverage of all areas of project management. This book covers fundamentals of project cost management. The important topics covered include cost ...

  14. PDF Project Cost Management

    ProjeCt CoSt ManageMent table of Contents Preface 2 Visit Our Website 3 About this Knowledge Area 4 Introduction 5 The PMBOK® Project Cost Management Processes 9 7.1 Plan Cost Management 10 7.1.1 Plan Cost Management: Inputs 10 7.1.2 Plan Cost Management: Tools and Techniques 11 7.1.3 Plan Cost Management: Outputs 13 7.2 Estimate Costs 14

  15. What is Cost Assignment?

    In summary, cost assignment is the process of associating both direct and indirect costs with cost objects, such as products, services, departments, or projects. It plays a critical role in cost accounting and management accounting by providing organizations with the necessary information to make informed decisions about pricing, resource ...

  16. PDF PMG 323: Project Cost Management

    This course satisfies 3 credit hours at Arizona State University. It is strongly encouraged that you consult with your institution of choice to determine how these credits will be applied. In order to receive academic credit for this course, you must earn a grade of "C" or better. You have one year to add the course to your transcript.

  17. GFEBS L230E: Cost Management Process Overview Course Assessment

    Cost Management in GFEBS consists of Cost Accounting, Cost Planning, Cost Controlling, Cost Analysis, and Cost Testing. FALSE. Assignments, rather than Allocations, should be utilized where possible unless the quantities of products and services cannot be tracked or are cost prohibitive.

  18. Cost Management Process Area

    Cost Management allows the organization to provide the best value to customers. Click on each of the four sub-processes to learn more. Cost Accounting: Accumulate and record all elements of cost, i.e., full cost incurred to accomplish an objective. Cost Controlling: Uses cost products for "best value" and "best practices" actions.

  19. PROJECT COST MANAGEMENT ASSIGNMENT

    PROJECT COST MANAGEMENT ASSIGNMENT - 1 Answer 1: - Project value analysis for Medical equipment supplies inc. NPV: BCR: PAYBACK PERIOD: Justification: NPV is -$42,384, so it is not advisable to go with the project, as there will be loss. BCR is 1 which is acceptable but not so attractive.

  20. MoSCoW method

    The MoSCoW method is a prioritization technique used in management, business analysis, project management, and software development to reach a common understanding with stakeholders on the importance they place on the delivery of each requirement; it is also known as MoSCoW prioritization or MoSCoW analysis.. The term MOSCOW itself is an acronym derived from the first letter of each of four ...

  21. A Quick Guide to the MoSCoW Method Technique

    The MoSCoW method is a technique used by organizations to communicate the importance and priority of the various requirements being met in various projects. This method is also referred to as MoSCoW prioritization and MoSCoW analysis. The term MoSCoW is an acronym that refers to the first letter of each of the four priority categories.

  22. MoSCoW Method of Prioritization

    Meaning and acronym of the MoSCoW Method. Moscow is an acronym made up of the first letters. The two Os have been added to make the word 'moscow' readable, they don't have any meaning themselves. The M stands for 'Must haves', S for 'Should haves', C for 'Could haves' and W for 'Won't haves' or 'Would haves'. Figure ...

  23. Target-costing As a Method of Cost Management in Catering

    The improvement of calculation systems is historically justified by the development of the management system and the increase in the number of users of accounting and reporting data and…. The article examines some key points are considered that make it necessary to introduce target costing in the accounting system of public catering ...

  24. Multi-stage two-echelon crowdsourcing logistics assignment model with

    For large-size problems, the proposed approach can help reduce the overall cost by 1.94% over traditional assignment approaches. Sensitivity analyses on three key parameters helped identify the key factors that affect the system cost, and several management suggestions were proposed based on the results.

  25. General election latest: Sunak's announcement gets brutal review from

    Rishi Sunak, Keir Starmer and other party leaders have kicked off campaigning after the prime minister called a general election for 4 July.