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How to Setup Budget Costs in Microsoft Project 2016

Welcome back to our course on Project 2016 Advanced.

In this section we’re going to look at Budget Costs.

I’m going to explain to you why people use Budget Cost, why you may want to use Budget

Cost and how you can compare progress on a project with a project budget, with specific

reference to costs.

Now I should point out that you can pretty much do the same thing with Budget Work.

And the approach with Budget Work is actually very similar but we’re going to concentrate

here on Budget Costs.

So I’m back here at the house build project.

This is version 03.

If I go to the Resource Sheet you’ll see that currently the Resource Sheet is empty.

And in fact there are no costs or resources assigned at all on this project yet.

So one thing that I might do very early on in a project like this is prepare a budget.

Now this wouldn’t necessarily relate to any very accurate estimate of cost but I might

say, for example, well I think that the labor costs are going to be $40,000 and the material

costs are going to be $30,000 and the legal costs are going to be $10,000 and so on.

So I might come up with some budget figures.

And then during the course of the project I’m going to want to see how the project

is progressing against my budget.

Now rather than do all of those all I’m going to do is take one element and show you

how you might deal with one element and then the other elements would be dealt with in

an equivalent way.

Now one thing that I must make very clear at this point is that you shouldn’t confuse

budget costs with baseline cost.

A baseline is a copy, a saved copy of a detailed schedule at a point in time.

In fact it can be a detailed or perhaps not very detailed schedule, but it’s a copy

of the schedule which will include details of start dates, end date, costs, etcetera,

whatever has been added at that point.

Budget costs are assigned at the project level.

And although we can compare the budget cost with our actual costs in whatever categories

we’ve set up it’s not the same as comparing progress, actuals that is, with a baseline.

So let’s use as our example a budget cost for services.

And by services we mean things like connecting the house to main services and getting an

inspection by a local building inspector.

So first of all let’s go to the Resource Sheet and we’re going to set up a resource

called Service Costs.

The type is Cost and I’m also going to create a group.

I’ll explain the use of the group in just a moment.

Now I’m going to open up that resource and I’m going to check the Budget checkbox on

the General tab to make it into a budget cost.

And now what I’m going to do is to assign it to the whole project.

In order to do that I need to assign it to the Project summary task.

So if I go back into my Gantt Chart view.

I don’t currently see the Project summary task.

Show Project summary task.

Now what I’m going to do is to assign the resource to the task.

Now when I assign a budget cost it must be assigned to the Project summary task.

You can only assign it to the whole project and you do that by assigning it to the Project

summary task.

You can’t the specify the units.

You can’t specify the cost.

You can only assign it.

However once you have assigned it you can then specify the cost in one of a number of

ways.

One way of doing it is we’ve currently got the Gantt Chart view.

Let’s go to the Task Usage view here.

You can see Service Costs there and what I’m going to do is to put in my estimate of the

service cost there, $500.

Now bear in mind that I may have a number of budget items there.

Each of them can have its own individual budget value and the zero summary task, in this case

Greendale House A, has the total budget cost for the project.

Now in order to specify that budget cost you’re already quite restricted in how and where

you do it.

In this case I selected the cost table, inserted the column Budget Cost, and then against a

specific resource item I can specify the budget cost.

If I were dealing with the same situation with budget work, as I say the approach is

very similar, I would show the Budget Work column.

And of course I would specify it against the particular budget work resource that I had

already assigned to the project summary task and then I would give it the budget work amount

in whatever units I wanted to.

The default there of course is hours.

So there’s my budget for Service Costs.

What I’m now going to do is to create a couple of resources that are going to basically

be in the same category as that budget cost.

Now when I say in the same category I actually have a number of ways of doing that.

What I’ve done on this occasion is to create a group and I will specify what you might

loosely call this category by putting those other resources in the same group.

I have alternative ways of doing this.

I could use code or I could of course use a custom field.

Now you’ve already seen how to use custom fields earlier in the course.

So if you prefer to do it that way that would be fine as well.

You’ll see why each of those methods is possible in just a little while.

Now let me set up these other two cost resources.

These are cost resources but of course they’re not budget cost resources.

So there we are.

I’ve set up the local inspector who is going to inspect the build and hopefully give it

approval.

And I’ve set up the service company who will be connecting the services to this new

build.

So let me go back into the Gantt Chart and I’m going to find first of all Connect to

services and assign one of the resources to that.

So that’s Service Company.

And I’ve discovered that the cost of using the service company to do the connection is

$295.

Notice how the cost is updated in the Cost table against that task.

And then under the Completion summary task, Final Inspection.

Well one of the resources on the final inspection will be the Local inspector and the cost charged

by the local inspector is $265.

So against my original budget of $500 I’ve now got two specific costs.

Now don’t forget you could do this for many categories of cost and work and I’m only

demonstrating it with one.

But let’s now see how we could report on this in a very convenient way.

So we’re talking about budget cost here and the category we’ve been dealing with

is a resource category.

So let’s go back to the Resource Sheet.

There it is just with our three resources on it.

And what we’re going to show instead of the Resource Sheet is Resource Usage view.

And we are going to apply a group.

So we use Group By.

We’re going to create a new Group By.

And we’re going to use the Group field.

Now this comes back to the point that I made a little while ago in that we could choose

any of a number of suitable fields here.

So we might use the code field, we might use a custom field that we’d created for this

purpose.

On this occasion I’m just using the group field, click on Apply and what you can now

see here for the group Service Cost group the budget cost $500 and then we have the

actuals.

We have the Final inspection $265, Connect to service $295.

And apart from seeing that budget cost $500 you can see the two planned costs.

Final inspection $265, Connect to services $295.

And you can see that at present our planned spend in Service Cost group exceeds the budget

by $60.

So that gives us a very convenient way of comparing the budget for one or more categories

with the planned and ultimately actual values in those categories as well.

And as I’ve mentioned two or three times already we can apply the same principle to

work.

Just one other thing to show you here which is also pretty important and that is you may

be interested in the time phase aspects of this.

Let me show cost as a detail.

So I’m going to switch on Cost.

Let’s just get the project in view.

You can see over on the right there those two costs being incurred.

The Connect to services cost and the Final inspection cost.

You may want to see how the planned cost compares to the budget cost over a period of time.

In this case you only have two items in that group but you may have many.

If I right click again on Details and go into Detail Styles, if I go down the list of available

fields one of them is Budget Cost.

Let me show Budget Cost.

And what Project 2016 does is to actually time phase that budget cost for you over the

period of the project.

And of course it just divides up that budget cost into those convenient slices for you.

You may want at the outset if you realize that you are only going to be spending from

this budget cost amount towards the end of the project you may want to change this distribution

of budget cost to reflect the fact that you’re going to be spending the money later on.

Otherwise you’ll appear to be doing better on cost earlier on in the project than perhaps

you should be because you won’t be spending any of your service costs until right near

the end of the project.

So if for example when you set up the budget cost in the first place you knew that the

distribution of spending that money would be that it would be towards the end of the

project you may do something like change the budget cost distribution.

Note the total being changed in the table on the left there.

You might have guessed in the early stages that the budget would be more like that.

Note that I’m back to my $500 total.

But I’ve sort of back loaded it.

I put in a profile for that budget cost.

And that will avoid the situation where I appear to be under spending on service costs

because I know as I said just now that I won’t be incurring those costs until later on in

the project.

So that’s budget costs.

That’s the end of this section.

Please join me in the next one.