Project cost management includes the processes involved in planning, estimating, budgeting and controlling costs so that the project can be completed within the approved budget.

As the business need undergoes analysis, progressive elaboration and estimates are completed based on varying levels of detail and, eventually, the cost of the project emerges. Often predicted costs and actual costs vary. Poor planning, skewed assumptions and overly optimistic estimates all contribute to this. For the project to be successful you must be able to plan, predict, budget and control the costs of a project,  further details available by going to this website  and untertaking a project mangment course. 

Costs associated with projects are not just the costs of goods procured to complete the project. The cost of the labour can be one of the biggest expenses of a project. You will need to rely on time estimates to predict the cost of the labour to complete the project work.

The cost of the equipment and materials needed to complete the project work must also be factored into the project expenses, as should life cycle costs, such as costs to support the product, including maintenance and service.

Project cost management is primarily concerned with three processes:

1. Cost estimating is developing an approximation of the costs of the resources needed to complete project activities.

2. Cost budgeting is aggregating the estimated costs of individual activities or work packages to establish a cost baseline.

3. Cost control influencing the factors that create cost variances and controlling changes to the project budget.

The work involved in performing the three processes of project cost management is preceded by a planning effort by the project management team. This planning effort is part of developing the project management plan process.

The cost management plan can establish:

1. Precision level. Schedule activity cost estimates will adhere to a rounding of the data to a prescribed precision (for example, $100, $1,000) based on the scope of the activities and magnitude of the project and can include an amount for contingencies.
2. Units of measure. Each unit used in measurements is defined, such as staff hours, staff days, week and lump sum for each of the resources.
3. Organisational procedures links. The Work Breakdown Structure (WBS) component used for the project cost accounting is called a control account (CA). Each control account is assigned a code or account number that is linked directly to the performing organisation’s accounting system. If cost estimates for planning packages are included in the control account, then the method for budgeting planning packages is included.
4. Variance thresholds for costs or other indicators (for example, person-days, volume of product) at designated time points over the duration of the project can be defined to indicate the agreed amount of variation allowed.
5. Earned value rules. Three examples of earned value rules that are generally defined or established or included in the cost management plan are:
   
   • Earned value management computation formulas for determining the estimate to complete (ETC).
   • Earned value credit criteria (for example, 0–100, 0–50–100).
   • Define the WBS level at which earned value technique analysis will be performed.
6. The formats for the various cost reports are defined.
7. Descriptions of how cost variances will be managed.