Microsoft Project Costing Best Practice
Microsoft Project for Windows can be utilized as a tool for entering and viewing detailed project cost data. Using Microsoft Project costing you can handle variations in resource costs over time, different rates incurred by the same resource for different tasks, material costs such as fuel and overhead costs such as travel or accommodation. Consider the Resource Sheet view:
In Microsoft project costing, the basic resource costing, for a work resource may be entered in the Standard Rate and Overtime Rate fields. The Cost/Use is a call-out charge; a single charge incurred every time the resource is assigned to a task, taking the same value regardless of the task’s duration. Whilst this data may be sufficient, it takes no account of changes in the rate paid to a particular resource over the project’s duration. For example, a resource may receive one or more salary increases (or salary cuts!) during the project. In addition, a resource assigned to multiple tasks may not charge the same rate for each task; this is more likely to be the case for contractors, rather than permanent staff members. The Accrue At field would affect the cash flow; if it is set to Prorated it means, for example, that when a particular task is 50% complete then for cashflow purposes 50% of the resource’s cost has been paid. Alternatively, it may be set to Start or End, if the full cost due is paid at the task’s start or end.
The Gantt chart for the sample project used here is shown above. The project starts on 1st December 2014 and ends on 9th March 2015. Let us suppose that Laura Smith, a permanent employee, receives a 10% pay rise on 1st January 2015. If we were simply to change her standard rate in the Resource Sheet view then we might well get inaccurate costing data. This is because Project would apply this increased rate to all the tasks to which Laura is assigned, not just those from 1st January onwards. In addition, let us suppose that Fred Parker, an external resource, has two rates for this project; his standard rate of £200/day and an alternative rate of £250/day. For a particular task he may charge either of these.
Both of these cost variations may be set via the Resource Information dialogue box. Firstly, to set Laura’s pay rise, select her in the Resource Sheet view then select Resource > Properties > Information.
Click the Costs tab on the dialogue box displayed:
Use the second row to enter firstly the date of the pay rise, then enter either the new standard rate itself or simply type 10%. If necessary, similarly edit the overtime and cost/use figures. Further such rows may be added at any time to take account of more changes to the pay rates.
To include Fred’s alternative rate of £250/d, display the Resource Information box for him, select the Costs tab, but this time select tab B. This, together with tabs C, D and E allows you to set up alternative costings. Each tab can include multiple rows to handle rate changes with time.
Simply enter the new rate in the usual way.
To apply a cost rate other than the default one (A) you will need the Task Usage view. We will say that Fred is charging £250/d for Development.
Select View > Task Views > Task Usage, go to the details for Development, and right-click Fred underneath Development. Choose Information from the shortcut menu displayed. This will display the dialogue box for Fred’s assignment for this task. Simply choose table B from the drop-down list labelled “Cost Rate Table”.
These settings relate to work, ie human, resources. Project also has material and cost resources. A material resource is just that; it could be fuel, cement, paint or whatever you wish. Having set the type to be Material, you also need to enter the material label (for example litres) and the price per unit. So in the example below, we have entered fuel, with material label litres and the price per litre as £1.25. When assigning a material resource, in the units field simply enter the number of litres (or whatever the material label is) being used. Choose Task > Properties > Information to display the Task Information dialogue box, click the Resources tab.
The final resource type, Cost, is designed to be used for some type of overhead (for example accommodation or travel) that may be incurred by a number of different tasks but may take a different value for each task. Little information is required in the Resource Sheet view apart from the name and type. Instead, the value is entered directly in the Cost field in the Task Information box. In the example above, £1,000 travel cost has been assigned to Development.
In addition to the resources, Microsoft project costing has a Fixed Cost field for individual tasks. This may be used to enter any extra costs incurred by the task over and above that resulting from the resource assignments. It can be displayed via the Costs table. For example, from the Gantt chart view select View > Data > Tables drop-down > Cost.
Note that subtasks such as Planning and Preparation the fixed cost would not affect the fixed cost of the associated summary task, Initialisation. In the example above we have said that Planning has an extra £200 and Preparation £300. On top of these we have said that Initialisation has £400 which does not belong to either subtask; it is a more general extra cost applicable to Initialisation overall rather than either of its subtasks. Overall, these fixed costs amounts to £900 extra.
When using Microsoft Project costing you do not necessarily have to enter any resource costs at all; if you have a separate method of calculating individual task costs then the Fixed Cost field could be used for the total cost for the task.
Microsoft Project Costing Related Links
27 July 2016