To evaluate your project’s financial status, you compare actual expenditures with those you planned. Project managers use a cost report that presents expenditures for the current performance period and from the beginning of the project for different levels of Work Breakdown Structure (WBS) components. The following information in this report comes from your project plan:
Identifying codes and names for each WBS component
The funds budgeted for each WBS component in the performance period
The cumulative funds budgeted to date for each WBS component
The total budget for each WBS component
Use a cost report to track expenditures.
The actual numbers for the period come from the data you obtain during that period. Actual in this illustration may mean the value of purchase requisitions, purchase orders, commitments, accounts payable, and/or expenditures. Total remaining funds are the difference between the total budget and the actual amounts expended to date.
Typically, you obtain your expenditure data from purchase requisitions, purchase orders, vendor bills, and written checks. You normally see all purchase requisitions because, as the project manager, you probably have to approve them. The procurement department typically prepares purchase orders, and you may be able to get copies. Vendor bills usually go directly to the accounts payable group in the finance department, and these people pay the checks. You may be able to have the finance department send copies of bills to you to verify the amounts and so forth, and you can request reports of all payments from your project’s account if they’re tracked by project code.
Do the following to increase the accuracy of your project’s expenditure data:
Remove purchase orders from your totals after you receive the bill (or verify that payment has been made) to avoid double-counting an expenditure.
Be sure to include the correct work package charge code on each purchase requisition and purchase order.
Periodically remove voided or canceled purchase requisitions and purchase orders from your lists of outstanding documents.
Before developing your own system to monitor your project’s expenditures, first check the nature and capabilities of your organization’s financial tracking system. Most organizations have a financial system that maintains records of all expenditures. Often the system also maintains records of accounts payable. Unfortunately, many financial systems categorize expenses by cost center but don’t have the capacity to classify expenses by project or WBS component within a project.
If you have to develop your own system for tracking project expenditures, consider using the following types of software:
Integrated project-management software, such as Microsoft Project
Accounting software, such as QuickBooks
Database software, such as Microsoft Access
Spreadsheet software, such as Microsoft Excel
Even if your organization’s financial system can classify expenditures by work package within a project, you’ll probably have to develop your own system for tracking purchase requisitions and purchase orders. Consider using a spreadsheet program or database software to support this tracking.