6 Ways to Forecast on Project’s Budget

forecast project management
Project Budget Forecasting

Project Management

The 7th edition of the PMBOK Guide specifies the performance domains that can be used to measure the success of the project. These domains specify various metrics for evaluating the success rate of the project. The metrics play a crucial part while carrying out each project activity. Without these domains, project professionals will not be able to conduct evaluations accurately. There are a total of 9 performance domains that have a significant influence on the successful delivery of projects.

Out of the 9 domains, the Measurement performance domain plays a key role in providing necessary metrics for forecasting. Each project is assigned a different budget, time period, and resources by basing it on several factors. The measurement domain assists project professionals to compare the course of activities that were initially planned with actual data. Variances identified while comparing enable project managers to apply necessary metrics for determining the future course of action. The measurement performance domain states the metrics for various categories. These metrics are carefully designed as per the outcomes of the project, objectives, and the environment in which the project takes place. There are 7 common categories of metrics that are constantly used by project professionals. One such category of metrics to determine the future performance of a project is the forecast metrics.

What is Forecast Metrics?

Forecast metrics help project professionals to determine the future state of the project by applying necessary calculations. The metrics can be qualitative, wherein project managers take the assistance of experts who can predict the future. On the contrary, project managers can even apply quantitative metrics for forecasting. This further makes it easier for project professionals to estimate the time, budget, and resources required for delivering the project successfully.

What are the Quantitative Forecasts?

The quantitative forecast measures make use of the past data for determining the future impacts on the project budget. Project professionals tend to apply value management measures or analytical measures for forecasting the future of project budgets. Let us have a detailed look at the common metrics chosen by project professionals.

Quantitative Project forecasting metrics for project budgets:

Estimate to Complete (ETC)

This metric is designed to assist project managers in deriving the cost incurred to finish the remaining tasks of the project. ETC uses cost performance index and budget that is set for completion of the project along with the earned value. Project managers can easily come to conclusion regarding how much more money is required to complete the project on time.

Estimate at Completion (EAC)

Estimation at completion metric can be used to determine the total cost of completing all the project tasks. It can be calculated using budget at completion and cost performance index. This metric helps project professionals to determine how much is already spent and how much more will be incurred on the completion of the project.

Variance at Completion

This measure is used to determine whether the project is within the budget or over budget. Variance at completion is calculated as the difference between Budget at Completion and Estimate at Completion. Applying this metric helps project professionals to determine whether the actual cost of the project is within the budget or not.

To Complete Performance Index (TCPI)

TCPI metric enables project professionals to know the future cost performance of the project. Project professionals apply this measure to know the future costs that would be incurred to complete the project within the specified budget. It is calculated as the ratio of remaining works to remaining funds.

Regression Analysis

This metric is one of the analytical tools applied for determining the relation between the independent and dependent variables. Project professionals apply this method to examine the series of input variables in relation to the corresponding outputs. While handling projects, this analytical method is used to interpret the future performance of the project.

Throughput Analysis

Throughput analysis is another analytical method applied by project managers to analyze the number of activities completed within the timeframe. This metric does not consider the activities yet to be completed. As a result, project teams make use of this metric to predict future performance. An example of applying throughput analysis can be seen while measuring the features complete vs features remaining.

Conclusion

These common forecast metrics can be applied to any given project to know the state of outputs before completing it. Project professionals make use of the forecast metrics to make better project-related decisions. In addition, these metrics assist in completing a project within the specified budget and time period.

Project managers willing to know more about such metrics and advance their skills can take up PMP Certification. Pursuing the certification entitles professionals to undergo PMP Training to gain a comprehensive knowledge of managing projects efficiently. Furthermore, the certification of PMP helps project managers to take up managerial positions and accomplish their career goals.