Appendix: Project Finances Formulas

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 project’s 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