Key performance indicators most important to track

Targeted cost is one of the most important metrics in earned value analysis. But it is impossible to effectively manage a project's budget without setting key performance indicators (KPIs). KPIs help you find out how much was spent on a project, how much the actual project budget differs from the planned one, and so on. Here are just a few widely known and used project KPIs that are essential for effective project budget management:

• Actual Cost (AC), also known as Actual Cost of Work Performed (ACWP), shows how much money has been spent on the project to date.
• Cost Variance(CV) indicates whether the estimated cost of the project is above or below the established baseline.
• Earned Value (EV) and Planned Cost of Work Performed (SCWP) shows the approved budget for the work completed on a specific date.
• Planned cost (PC), as well as the budgeted cost of planned work, is the estimated cost of planned project work as of the reporting date.
• Return on Investment (ROI) shows the profitability of the project and whether the benefits exceed these costs.

A project left without budget management and without re-forecasting will lead to failure. Continued budgetary oversight is essential to avoid overspending. A 10 percent budget overrun is much easier to correct than a 50 percent overspending, so if you don't monitor your budget and make up-to-date forecasts, a 10 percent overspending can easily turn into a 50 percent overrun. By regularly reviewing the budget, your chances of keeping the project under control are much greater than if you only reviewed it once.

Project resources as well as the budget should be constantly monitored as people working on the project, contribute to its cost. The project manager should review weekly the number of people who are currently working on the project, as well as the future resource requirements of the project. This will allow you to take full advantage of the resources you have and ensure that you have all the resources you need for the rest of the project. Regular revision of the resource forecast will help keep the project budget on track. The uncontrolled growth of the scope of the project is also one of the main reasons for the cost overrun of the project. As unplanned work takes time and money on your project, work hours increase, deadlines shift, and project budgets can get out of hand. Project managers must carefully monitor and manage the scope of work by issuing change orders to the project to add work that was not covered by the original project requirements. These design change orders serve as the basis for allocating additional funds to cover the cost of additional work and thus align the project with its new budget.