To control the cost of a work you need to relate what was spent with the work that has already been carried out. KOSAN brings together the budget, progress and the record of actual expenses, and allows you to review their relationships in the S-curve and earned value module.
That tracking serves to investigate differences while you can still review purchases, productivity, and work area-end organization. A useful comparison preserves the scope of reference and uses the same economic basis in the amounts analyzed.
What it means to compare budget and actual cost
The budget estimates the cost of the defined scope. The actual cost records the resources used or recognized up to a reporting cut-off according to the adopted criterion. To compare them you need to know how much work corresponds to each amount.
If an activity is half finished, its expenditure must be analyzed against the budget of the project executed. Comparing only the partial expense with the budget for the entire activity can hide a deviation per unit.
Updating estimates with actual data and analyzing their differences is a practice described in the GAO cost guide. Methodological reference on cost review.
Example: an activity is within the total, but costs more per unit
Suppose an activity 100 m², with budgeted cost of $200 per m², before VAT. Your total budget is $20,000. At the reporting cut-off, 80 m² have been executed and the associated cost is $18,400. The figures are hypothetical.
| Reference | Result |
|---|---|
| Total budgeted amount | 100 m² |
| Budgeted cost per unit | $200 per m² |
| Total budget | $20,000 |
| Quantity executed at reporting cut-off | 80 m² |
| Budget of the project executed | $16,000 |
| Actual cost of the same job | $18,400 |
| Difference to reporting cut-off | $2,400 about reference |
The expenditure of $18,400 is still less than the total budget of $20,000. But the expected cost of those 80 m² was 80 × $200 = $16,000.
The difference is $18,400 − $16,000 = $2,400, equivalent to 15% of the budget of the project executed. The observed unitary actual cost is $18,400 ÷ 80 = $230 per m².
If the outstanding 20 m² kept that cost per unit, they would require $4,600. The total projection would be $18,400 + $4,600 = $23,000, that is, $3,000 more than the initial budget. That projection depends on maintaining the observed condition; Check to see if the difference includes initial costs that will not be repeated.
How to investigate the cause of a deviation
Separate the problem into data that you can verify:
- Price: Were the resources purchased at a different price than expected?
- Consumption: Were larger quantities used per unit of work?
- Productivity: Did the staff or equipment require more time than expected?
- Scope: Were different or additional jobs carried out?
- Registration: Are there taxes, duplicate expenses or amounts from another activity?
A difference can combine several causes. For example, a more expensive material and a lower productivity rate affect components other than the APU. Separating them helps you choose the action: renegotiate supply, revise the method, or document a change.
How to organize data in KOSAN
In Comprehensive administration, the section Actual expenses allows you to record line item of the expense, type, supplier, date, subtotal, taxes and associated activity. You can classify material, labor, equipment, subcontract or other expenses.
The module S-curve uses recorded expenses along with catalog, program, and progress payment statements. It presents indicators to review performance and projections subject to its calculation assumptions.
Review the catalog base that feeds the comparison: budgeted cost and selling price respond to different amounts. Also confirm if your expenses contain taxes and if the reference budget includes them.
KOSAN has Versions and scenarios to keep references and compare budget changes. This possibility helps you review what you modified and keep the basis on which a decision was made identified.
A repeatable monitoring process
- Identifies the budget and reference scope.
- Define a cut-off date and measure the work performed.
- Record expenses with consistent tax classification and treatment.
- Relate the amounts to the corresponding activities.
- Compare cost of work executed and actual cost of the same scope.
- Investigate differences in price, consumption, productivity rate and range.
- Document the chosen action and review its effect on the next reporting cut-off.
A purchase of stored material, for example, can generate a payment before consumption. Cost control and cash flow need identified criteria to interpret that case without mixing dates or scopes.
Frequently asked questions
Does spending less than the total budget mean I'm doing well?
Checks how much work has been executed. A lower expense may correspond to a lower progress and still present a higher cost per unit than expected.
What do I do if the price of the material went up?
Update the reference to study the effect and keep the previous budget. If there is a contract, review separately how to treat that change with the client.
Does each deviation imply a definitive loss?
First analyze the cause and scope. Some amounts correspond to start-up costs, advance purchases or changes that require reclassification; others show a trend that requires action.
KOSAN connects budget, execution and recorded expense, so you can review the differences with a specific reference and decide how to address them.
To prepare a reviewable initial reference, see how to make a construction budget step by step.