Finance

Your Guide To BCWP

author-img By Arnab Dey 5 Mins Read 11 September 2023

BCWP

Budgeting is rarely something that we look forward to doing.  Whether we do it weekly, monthly, or yearly, it tends to spark some uncomfortable conversations (to say the least).

Still, it remains something necessary to ensure that we are running our businesses and operations effectively.  It is unfortunately easy to make some oversights when we are doing this, though.

Today, I would like to talk about this topic specifically in the context of project management, since it is quite an important facet of this. Now, if you are not overly familiar with the concept of PM in the first place, do not worry.

I am going to cover this and more, so keep reading!

Project Management: A Breakdown

Project Management

Now, I want to start here since I think it is important for understanding BCWP (budgeted cost of work performed). For a simple introduction to the topic, you can check out this page. Essentially, you are handling the management of a project, and you are given that role because of the unique qualifications and experience that you bring to the table.

If you find yourself in this position, it likely means that you fulfill those criteria to some extent.  Still, though, what constitutes a “project”?  Of course, this will vary depending on what industry or field that you work in, but there are some general rules. 

I will cover them just so you can prepare yourself, especially since you will not always be officially given the PM title even if you have the role and responsibilities.

When we put it into general terms, though, when we are working on a project it is a team or individual working together on some sort of product or service development or improvement.  More often than not they are temporary ventures, but they still require adequate resources and time dedicated to them to be successful.

The leader is the person who guides the other members into higher productivity and steers them in the right direction while ensuring that it all runs smoothly along the way.  So, it does carry a certain level of responsibility and power to be in a PM role.

This is probably why it is such a complex topic to discuss, but hopefully, this has helped you get somewhat of an idea of what to expect from the role and the process of a project in the first place.

Shifting Our Attention: Budgeting

Budgeting

Now, let us change our focus.  When it comes to how we calculate BCWP, obviously knowing what budgeting is and how it works is going to be quite important. Thankfully, it is quite an easy concept to understand; it is just the act of managing how money is spent and utilized. Of course, that is something that matters when it comes to projects.

In terms of BCWP, let us define that.  Basically, it is an evaluation of how much work is done for each of the dollars spent on the project that is being progressed. Now, there is a certain level of subjectivity to it, since it can be hard to definitively sort out what counts as “work” by employees.

How does this work, and when should we perform these calculations? This is another complexity of it, but most project managers prefer to do it both during the process and once it concludes.  After all, this is where the user data comes from!

Why is that, then?  Well, if the goal is to prevent overspending or to rectify poor levels of productivity, evaluating the BCWP over the course of the project can help a manager fix those problems along the way. 

Efficiency is typically highly valued in business, so I am sure that makes sense to you if you are experienced at all in this sort of thing.

Why it Matters

BCWP model

Admittedly, at first glance it might seem like this is an overly “controlling” or annoying way to manage a project.  However, there are ways to implement it in which it will not come off or present that way, and there are plenty of benefits to using the BCWP model.  Allow me a moment to explain, to conclude our discussion today.

Part of it comes down to the fact that going over budget is something that happens.  Obviously, it is not a good thing, but sometimes, it is unavoidable. 

When we utilize this method, though, especially by checking in intermittently, it is easier to avoid this issue. We are able to determine whether we are on track to remain within our established costs or if we are getting close to exceeding that.

From there, it is not overly difficult to pivot or make changes necessary to get back on the correct path if we have strayed.  So, that is just one reason why this can be quite an important concept to get a grasp on.  There are even lectures on the topic, as seen here on this page.   

Now, there are always going to be some drawbacks, but typically the benefits outweigh them.  You see, BCWP was designed not just to protect the business but also the employees working on the given project. 

However, because it does not really take quality into account, that could end up causing some complications in the future.  Remember, sometimes quantity should not be prioritized over quality in terms of work produced.

As you can see, though, it is a versatile way to calculate and account for any money spent when working on a specific product or service that we are developing.  Perhaps it is something that a client has ordered or just something that the company wants to progress on.  Either way, it is important to make sure that it goes off without a hitch!

So, for any PMs out there, I sincerely hope that the information I have provided today is helpful.  Maybe you learned something new, too, about how to proceed and what you can anticipate from these experiences!

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Arnab Dey

Arnab is a passionate blogger. He is very much passionate about social media. His special interests are in current affairs, business, lifestyle, health, food, fitness, etc. If you want to read refulgent blogs so please follow Online News Buzz.

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