Budget, Budgeting & Control2

8/8/2019 Budget, Budgeting & Control2

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Planning and control

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y They are two closel y interdependent , inseparable functions of management .

y Planning ref ers to the process of envisaging w hat will

be done and w hat will happen.y Control is the process through w hich managers tr y toensure that the actual e v ents and activities conformto the plan.



Cont¶d

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y The main purpose of planning and control is toenable managers to carr y out the various activitiesefficientl y and eff ectiv el y .

y It helps them to prepare a detailed plan of action andensure the activities conform to the plan.

y

Planning is meaning full if it is follow ed with controland so control uses planning as its bases.



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y There are two outputs from the planning activities

the detailed work plan

the financial budget

y The work plan forms the bases for project execution

y The financial budget facilitates the procurement,disbursement ,and control of the funds.



How to prepare work plan

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y The 1st. Step is to list the activities of the projectrandoml y as they occur to y our mind.

here ensure that the activities are mutuall y exclusiv e.

y The 2nd. Step is to arrange them in chronologicalorder of the time of commencement of each activit y .



Project document

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y W hat is a project document ?

y W hat dose it comprise of ?

y R eflect on««.



Cont¶d

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y The main purpose of a project document is toexplain in explicit terms all the rele vant details of an y project .

it comprises : The sector or field in w hich the project isenvisaged

The sub-sector or the specific area of activit y The problems the project is expected to address

short term and long term problems



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The strateg y in tackling the problems

A full description of activities or components cov ered b y the project.

the immediate and the long term objectiv es of each of the components

The time frame for project implementation

The resource required and finall y the financial budget indicating the project cost.



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y In the project document there is a project summer y in w hich a summarized v ersion of the entire project ,

various components called ³sub-projects´ and an y

other rele vant information of the project are puttogether.

y The project summer y is the basis for the preparationof the detailed work plan.



The detailed work plan

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y The work plan forms the basis for the preparation of the project budget .

y The timing and schedule of various disbursements

required for the project.y The work plan should be prepared before the formal

beginning of implementation of the project .

y It helps to ensure the project budget is properl y fittogether with the work plan.



Cont¶d

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y At the time of implementation it can be re vie w ed inorder to incorporate an y changes required.

y It is prepared onl y with the involv ement of those

directl y responsible for the projectsimplementation.

y It should identif y each project activit y and relatedsub-activities separatel y .

y

It should also indicate clearl y the interrelationships b/n various activities and sub-activities.



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y It should show the scheduled starting time,finishing time and the expected duration.

y There also be an indication of w hen specificinputs are needed or expected to be deliv ered for each activit y or sub-activities.





Cont¶d

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R eflection

Identif y and discuss the important or

k ey elements in the 1st

. definition of budget.





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A financial budget is prepared from the phy sicalaction plan or the work plan.

In the working plan :

y various activities , their sequence and the time at w hich the activities are carried out

y the various resources required for the project

y Then the resource will be conv erted into financialterms.



Budgeting

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y The process of preparing the action plan in sufficientdetail for a specific operational period, culminatingin the financial budget .

y The term planning cov ers a time frame of longerthan one year as adequate to complete the project.

yW here as budgeting cov ers a short period of a yearor less.













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Can these e v ents be used as milestones to monitorthe progress of implementation ?

Can the entire project be subdivided into clearl y

demarcated components?Can w e identif y specific persons in the project

team and staff w ho could be made, responsible forthese components?

Can the target e v ents be attributed to or identified with specific components?



Monitoring, reporting ande valuation

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y Monitoring is a continuous close follow up of the implementation of a project.

it is used:

to ensure that the various activities are carriedout and the progresses are according to the plan.

to facilitate earl y correctiv e action if needed.















Target setting

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W hat is target ?

y in defining targets , w e need to consider the starting point

the outcome required the timescale

the constraints













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Common variance in the control of projects

Scheduled start v ersus actual start

scheduled finish v ersus actual finish

scheduled date of milestone v ersus actual date w henthe milestone was reached

Scheduled time for an activit y v ersus actual time foran activit y .



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Budgeted cost v ersus actual cost

Measured value v ersus actual cost

Budgeted man hours v ersus actual man hours .

Budgeted unit cost v ersus actual unit cost .

Budgeted percent complete v ersus actual percentcomplete.



Cont¶d

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The variance anal y sis approach( V AA) is inadequate for project control because:

A) It is historical backward looking method of anal y sis

B) It doesn't use all the data available and doesn't lenditself to an integrated approach with progress andcost.

C) It doesn¶t clearl y indicate performance.



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A) Backward looking v ersus forward looking:

Eff ectiv e project control requires objectiv es answ ersto:

1. W hat happened in the past ? Are w e on schedule , ahead or behind?

Is the work being completed to the budget estimate ,less or more costing ?



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2. W hat is going to happen in the future?

Are w e going to be on schedule, on budget ,or ov erschedule and ov er budget?

w hat is the trend of progress and cost?3. Is the rate of work accelerating or decelerating ?





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C) V ariance anal y sis doesn¶t clearl y indicate performance.

There are other methods to indicate performance.



Performance anal y sis

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Performance anal y sis sometimes termed as modernmethods of organizing project control s y stem.

It is applied based on the use of:

Three diff erent t ypes of control centers to controlprogress and cost, with diff ering modes of anal y sis.

The work breakdown structure ( WBS) to provide aframe work to integrate the subs y stems and to

consolidate reporting.













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Budget, Budgeting & Control2

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