Sometimes project finances can get confusing, so feel free to use this guide as a reference for various financial metrics commonly used in project management.
Cost and Budget Formulas
- Planned Labor Cost – a prediction of how much labor cost the project might need.
Planned Labor Cost = Estimated Hours x Internal Hourly Rate
- Planned Expenses – a prediction of non-labor related costs the project might need.
- Planned Project Cost – the expected total cost of the project at the very beginning of the project.
Planned Project Cost = Planned Labor Cost + Planned Expenses
- Actual Labor Cost – the total cost of labor spent on the project to date.
Actual Labor Cost = Actual Number of Hours x Internal Hourly Rate
- Actual Expenses – how much has been spent on project expenses to date.
- Actual Project Cost – the real-time summary of the projects actual labor costs and expenses once the project has started.
Actual Project Cost = Actual Labor Cost + Actual Expenses
- Estimate at Completion (EAC) Labor Cost – the estimated total labor cost at the end of the project.
EAC Labor Cost = Actual Labor Cost + ETC Labor Cost
- ETC Expenses – remaining expenses needed to complete the project.
- ETC Project Cost – the real-time summary of the remaining estimated labor cost and planned expenses – what is left to complete the project.
ETC Project Cost = ETC Labor Cost + ETC Expenses
- Estimate to Complete (ETC) Labor Cost – remaining labor cost needed to complete the project.
ETC Labor Cost = Hours Left x Internal Hourly Rate
- EAC Expenses – estimated total expenses at the end of the project.
EAC Expenses = Actual Expenses + ETC Expenses
- EAC Project Cost – estimated total cost at the end of the project.
EAC Project Cost = EAC Labor Cost + EAC Expenses
- Total Project Budgeted Cost – a set amount allocated to a project as a cost threshold that the Project Manager needs to remain under.
Total Project Budgeted Cost = Planned Project Cost + Contingency Padding
- Remaining Budget – the amount left to complete the project.
Remaining Budget = Total Budgeted Cost – Actual Cost
Billing and Revenue Formulas
- Actual Flat Fee Activities – the sum of all flat fees associated with billable activities that have been completed.
- Actual Labor Billing – the amount of money matching the performed billable labor.
Actual Labor Billing = Actual Billable Hours x Billing Rate + Actual Flat Fee Activities
- Actual Billable Expenses – the sum of all actual expenses that are billable to a customer.
- Actual Billing (Project Revenue) – the amount of money matching the work you are ready to bill your customer for.
Actual Billing = Actual Labor Billing + Actual Expenses
- ETC Flat Fee Activities – the sum of all flat fees associated with billable activities that are not completed yet.
- ETC Labor Billing – the amount of money matching the billable labor that was not performed yet.
ETC Labor Billing = Billable Hours Left x Billing Rate + ETC Flat Fees Activities
- ETC Billable Expenses – the sum of all planned billable expenses.
- ETC Billing (Revenue) – estimated amount of money expected yet to be charged to the customer.
ETC Billing = ETC Labor Billing + ETC Billable Expenses
- EAC Labor Billing – the amount of money matching the estimated billable labor at the end of the project.
EAC Labor Billing = Actual Labor Billing + ETC Labor Billing
- EAC Billable Expenses – the sum of all billable expenses at the end of the project.
EAC Billable Expenses = Actual Billable Expenses + ETC Billable Expenses
- EAC Billing (Revenue) – the estimated total amount of money expected to be charged to the customer by the end of the project.
EAC Billing = EAC Labor Billing + EAC Billable Expenses
- Actual Project Profit – the real-time difference at any given moment between Actual Project Revenue and Actual Project Cost.
Actual Project Profit = Actual Project Billing – Actual Project Cost
- Estimate at Completion (EAC) Project Profit – how much profit or loss is estimated to be at the end of the project.
EAC Project Profit = EAC Project Revenue – EAC Project Cost
- Actual Profit Margin – real-time profitability of the project represented as a percentage.
Project Margin = Actual Project Profit / Actual Project Revenue * 100%
- EAC Profit Margin – estimated profitability at the end of the project represented as a percentage.
EAC Project Margin = EAC Project Profit / EAC Project Revenue * 100%
- Billed – total amount already billed to a customer.
Miscellaneous Project Financial Formulas
- Work in Progress (WIP) – shows how much work has been completed that has not been billed to the customer yet.
Work In Progress = (1 – (Total Billed / Total Project Billing)) * 100%
- Cost Performance Index (CPI) – shows how well the project is performing relative to the project budget.
CPI = (Progress * Estimated Hours * 100) / Actual Hours
- Schedule Performance Index (SPI) – shows how well the project is performing relative to the project schedule.
SPI = (Progress / 100) / (Current Date – Start Date) / (End Date – Start Date)
- Utilization Rate – a ratio between the total billable hours spent by each resource to their available hours and is calculated as a percentage.
Utilization Rate = Billable Hours / Total Available Hours * 100%
- Realization Rate – a ratio between total billed hours compared to the total available billable hours.
Realization Rate = Total Billed Hours / Total Billable Hours * 100%
- Realized Rate – an effective billing rate based on the Realization Rate and your resources billing rate.
Realized Rate = Realization Rate * Billing Rate