Planned vs. Actual Budget in Project Management

Planned vs. Actual Budget is an essential project management KPI that measures the variance between the projected budget for the project and the actual costs incurred. This metric provides information on budget efficiency, financial performance, and the overall cost management of a project.

The Planned vs. Actual Budget KPI is particularly useful for ensuring that project costs are being effectively controlled and managed. It enables project managers to monitor excessive spending, identify areas of over or under-utilization of resources, and make necessary adjustments to ensure financial efficiency.

Calculation of Planned vs. Actual Budget

The Planned vs. Actual Budget KPI is calculated by simply subtracting the planned budget from the actual budget.

Here is the formula for calculating this KPI:

Budget Variance = Actual Budget - Planned Budget

In this formula:

• The Actual Budget refers to the actual money spent on the project.
• The Planned Budget refers to the estimated budget allocated for the project in its planning phase.

A positive Budget Variance value indicates that the project has overspent its budget, while a negative value implies the project is under budget. A zero value means that the project's actual expenditures match the planned budget precisely.

By using the Planned vs. Actual Budget KPI, project managers can ensure that costs are kept under control and take corrective actions as necessary, contributing to the overall financial success and efficiency of the project.