HKSM

Time-phased projections of future revenue and spending based on actuals, trends, and approved changes. They help predict financial performance and cash needs so the team can act early, protect margins, and secure funding.

Key Points

• Rolling projection that updates the budget view with the latest actuals, trends, and approved changes.
• Time-phased by week or month, covering both revenue and costs, with margin and cash flow implications.
• Includes assumptions, drivers, confidence ranges, and links to change requests and risks.
• Leverages measures like EAC, ETC, CPI/SPI, burn rate, and recognized vs billed revenue rules.
• Version-controlled, traceable to source data, and aligned with the cost baseline and contract terms.

Purpose

Provide early visibility into where finances are headed so leaders can course-correct before variances escalate.

• Enable timely decisions on scope, staffing, and vendor spend to protect margin and ROI.
• Support funding and cash flow planning, especially for milestone billing and long lead procurements.
• Set clear, realistic expectations with sponsors and finance for the coming periods.

How to Create

• Assemble inputs: actual costs and revenue to date, approved change requests, cost baseline, WBS/work packages, resource plans, rate cards, contracts and billing milestones, procurement quotes, and the risk register.
• Choose an approach: bottom-up from remaining work, trend-based extrapolation, EVM-driven EAC/ETC, or a hybrid with scenario analysis.
• Build the revenue view: unbilled backlog, billing schedule, rate × hours for T&M, percent-complete rules for fixed price, and revenue recognition policy.
• Build the cost view: remaining effort × blended rates, materials and licenses, subcontractors, travel, overhead/indirects, and contingency or reserves.
• Time-phase the forecast by reporting period and align with key milestones and lead times.
• Document assumptions, drivers, dependencies, and confidence ranges (optimistic/base/pessimistic).
• Review with finance and key stakeholders, reconcile to the latest baseline or funding limits, and publish the approved version.

How to Use

• Compare against the cost baseline and revenue plan each cycle to spot variance and margin impact.
• Trigger actions such as change requests, staffing adjustments, vendor renegotiations, or re-sequencing work.
• Update cash flow and funding requirements to ensure liquidity and avoid payment or procurement delays.
• Inform status reports, dashboards, and S-curves with forward-looking financial insight.
• Feed scenario and risk response planning, including reserve drawdown or replenishment.

Ownership & Update Cadence

• Primary owner: Project Manager with the Project Controller or Finance Partner; inputs from Work Package Leads and Procurement.
• Cadence: at each reporting period (e.g., monthly or per sprint), and ad hoc for major changes or threshold variances.
• Governance: version-controlled and approved through integrated change control when scope, schedule, or contract terms shift.

Example

A 10-month fixed-price project has a BAC of $1,000,000. After month 4: AC = $420,000, EV = $380,000 (CPI = 0.90).

• Cost forecast: performance-based ETC ≈ (BAC − EV) / CPI = ($1,000,000 − $380,000) / 0.90 ≈ $688,889; EAC ≈ AC + ETC ≈ $1,108,889.
• Revenue forecast: percent-complete recognition at 38% yields $380,000 recognized; next quarter plan adds 35% completion, so projected revenue next quarter ≈ $350,000.
• Actions: raise a change request for overrun risk, re-sequence work to improve productivity, and update funding and cash flow to cover the higher EAC.
• Assumptions: productivity improves after onboarding is complete; no new scope beyond approved changes.

PMP Example Question

During a monthly review, the project shows CPI = 0.85 and an approved scope increase for next quarter. What should the project manager do first when updating revenue and cost forecasts?

1. Keep the current revenue plan and only add the cost of new scope.
2. Use actual costs to date as the final EAC and leave revenue unchanged.
3. Recalculate ETC/EAC using current performance and incorporate the approved change’s billing and cost impacts.
4. Delay any changes until the next quarter to avoid confusing stakeholders.

Correct Answer: C — Recalculate ETC/EAC using current performance and incorporate the approved change’s billing and cost impacts.

Explanation: Forecasts must reflect performance trends and approved changes. Updating both cost and revenue with ETC/EAC and contract billing rules provides a realistic forward view.