Financial Management of Projects

Title : Financial Management of Projects - EVM

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Abstract

The explains the meaning of the earned value management how its applied and the profitable results of its application to organizations The methods on how to apply it are also analyzed

Earned Value Management

This refers to the best way we manage the projects we know of in to justify spending and avoid costly project overruns . It is a project management system that combines schedule performance and cost performance . It provides a systematic approach

to integrating and measuring cost , Schedule , and technical accomplishments on a project or task (Allen 2008 . The EVM brings a solution on the received for the money spent hence a very valuable tool for project managers (Watts 2008

The EVR is very necessary in my organization now because there 's need to determine the project performance and also plan for future performance trends in relation to the current earned value . EVR helps this organization in ascertaining favorable and unfavorable variances hence understanding the reasons for under runs as well as overruns resulting into masking the specific areas having problems within the organization the cause of that problem , impact it has on the program the corrective action , and when it should be rectified to avoid losses (Watts , 2008a . By doing all these the organization has hence come to address poor initial planning or estimation , addressed adequately the technical breakthroughs and problems , the usage of labor or other direct costs higher or lower than planned (Watts , 2008b

It enables the organization to give the customers timely and reliable data which is used for determining product oriented contract status and projecting future performance based on current trends . It also provides an objective measurement of how much work is accomplished on a project and enables the management team to compare work completion against the amount of work planned to be accomplished of which constitutes a performance measurement baseline (Earned value management , 2008 . The work is earned on the basis of how it is performed . Comparing the earned value with the planned value measures the dollar value of work accomplished versus the dollar value of work planned of which the difference brings a bout the schedule variance . This helps in ascertaining the cost of labor (Earned Value org , 2003

Earned value - Planned costs schedule variance

EVR also assists the organization in the preparation of time-based budget hence enabling them to break overall budget intervals of weeks months , quarters or years . This provides baseline for tracking actual costs against periodic budget targets . EVR provides a simple technique for tracking project costs , which reveals a top-level view of project financial performance that is useful for executive briefings , where expenditures are to be matched to funding terms . Earned value management system provides the firm with an accurate picture of spending and accomplishments related to baseline plan . Hence enables management to form quick conclusions about the projects team 's staffing levels and productivity , as well as giving insights into the problematic...