Cost Breakdown Structure and Budget Management
Manage the financial aspects of any project and create a structure for applying measurable cost controls
As part of Adeaca PBA, the Cost Breakdown Structure serves as the central planning structure financial controllers use to create budgets and calculate various financial metrics such as: estimate at completion, cost to complete, variances, and earned value.
Cost Breakdown Structure in a Generation 3 Project Business System
As part of Adeaca PBA, the CBS provides unique capabilities that go beyond other solutions on the market.
Generation 1 and 2 systems today use the work breakdown structure (WBS) as both the financial and operational hierarchy of the project which causes a major project governance flaw.
Due to the true integrated nature a generation 3 system, the CBS in Adeaca PBA enables project-driven companies to manage their project financials with real-time analysis that gives them more control over the costs of their project.
Plan and Manage all Project Financial Activities
Company financials are often managed in a spreadsheet which is manually updated and prone to error, leading to neglect simply because it’s difficult to keep up.
The cost breakdown structure represents the costs of the components in the work breakdown structure and is required for project-driven companies to appropriately manage the financial aspect of any project.
- Provides a multi-level hierarchy that allows you to define the exact level of details required to efficiently manage a given project
- Manage costs and create meaningful, real-time financial analysis directly connected to the WBS
- Directly and automatically updates from the WBS
Real-Time Financial Analysis Directly Connected to the Work Breakdown Structure
Any change in the project schedule that affects the financial aspects of a project is known immediately.
Project financials are often managed in spreadsheets that are completely divorced from the operational aspects and does not represent the current reality of the project. The CBS in Adeaca PBA is a comprehensive financial structure for all your projects directly linked to the WBS and updated in real time.
As part of Adeaca PBA, the CBS allows you to create budgets based directly from the work breakdown structure, automatically providing a cost-loaded schedule.
The CBS allows you to instantly calculate various financial metrics such as EAC, cost to complete, variances, and earned value.
The CBS provides a structure to efficiently manage costs at the appropriate account level and conduct real-time financial analysis.
Single financial hierarchy
The CBS in Adeaca PBA provides a single financial hierarchy to manage your project costs. The structure helps you improve cost control, understand your cash flow, and accurately report on revenue.
- Estimate at Completion
- Change orders
- Progress and productivity
Projects configured with completed percentage revenue recognition can base accrued revenue on estimate at completion (EAC) as defined in the costing sheet. Both the costing sheet and the revenue recognition process are typically configured to align with the financial periods so that EAC and revenue recognition are processed at a monthly cadence.
Budget management in the CBS
Budget management in the CBS captures cost, revenue, and deliverables budget. The deliverables, or quantity budget, is an additional progress indicator outside of how much of the budget you’ve consumed. A quantity budget can represent a percentage of completion, number of units completed, or any kind of measurable quantity against the project.
There’s also a distribution key that shows you how many hours are going to be delivered over a specific time frame. In addition, it’s also time phased, meaning it tells you how much it’s going to cost per month. That data then feeds into earned value analysis, cash flow, and anything else that needs time-phased information.
Full audit trail of all budget versions
All budget positions are processed within dedicated budget versions against the CBS. Budget versions are subject to approval, capturing cost and revenue estimates as well as cash-flow projections.
You can establish project budgets using the Project Modeler, built-in templates, or via XML interface to external estimation tools. Changes to the original budget are processed as revisions, change orders, or transfers.
Budget versions also entail estimation of deliverables, contingencies, and undistributed budgets for rolling-wave planning.
Create the budget from the project schedule and manage the cost of any changes
Operating in a generation 3 project business system allows you to establish the budget directly from the work breakdown structure because of the completely integrated nature of PBA, where the project schedule is in the same system as the project financials.
For example, when creating the project schedule, you will know what kind of labor you’ll need, how much of it, and when. Then you can copy that information directly into the CBS, and it will be time phased with the right amounts, all based on the project schedule.
Furthermore, any changes made to the project schedule can be captured in a change set. The cost of the change set can be recorded and then copied directly into the budget.
How the Cost Breakdown Structure brings value to your organization
Better Cost Control
The CBS allows you to define the exact level of details required to efficiently and effectively manage a given project. All budget positions are processed within dedicated budget versions against the CBS.
Enhanced Risk Readiness
As part of Adeaca PBA, the CBS is directly and automatically updated from the WBS and vice versa. Any change in the schedule that affects the financial aspects of a project is known immediately. Therefore, you can quickly take mitigating actions against issues that arise.
By having the CBS run parallel to the work breakdown structure you can better manage costs and conduct real-time financial analysis directly connected to the WBS, ultimately help you deliver more projects on time and therefore on budget.
Download the Feature Brief: Cost Breakdown Structure and Budget Management
Download the Cost Breakdown Structure Feature Brief to learn more and discover what it can do for your company.
What you will learn:
- What is the Cost Breakdown Structure and its purpose
- How does it work
- Problems the Cost Breakdown Structure solves
- Use cases for the Cost Breakdown Structure
- How the Cost Breakdown Structure will benefit your company
If you need a way to manage your project financials with real-time analysis that gives you more control over the costs of your project, you need this brief.
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