Argh, cost reports have landed in my inbox and now I have to look at them…
Do you feel like that? Project accountants are sending out end of month financial reports for us to reconcile or review and somehow cost reports feel harder than schedules. So let’s whisper it: if you receive financial reports you don’t fully understand, you are not alone!
The numbers might look familiar, but the relationships between them are not always clear. This can make financial conversations uncomfortable and reactive – not a good look when you’re sharing the budget position in Steering.
Definitions project managers should be confident using
We should be able to confidently understand and use these terms, as project managers:
Actuals
Actuals are what has already been spent and recorded. This includes money that has been spent outside the organisation e.g. to suppliers, and any internal costs you have to take like resource costs for colleagues working on the project.
Forecast
Forecasts are estimates of what the project is expected to cost in total, or in your organisation it might mean what is left to spend. In a view of a year, you’ll have actuals for the months that have closed and forecasts for predicted spend in the months to come.
Commitments
Commitments sit in between: money that has been contractually committed but not yet spent. These are normally reflected in purchase orders or statements of work, where you’ve told the vendor it’s OK to go ahead but they haven’t invoiced yet, or maybe even done the work yet.
However, you can’t look at these figures are viewed in isolation. A common misunderstanding is assuming that unspent money is still available – it’s not because some of that will already be committed to suppliers (through POs or SOWs) or in internal resource costs (for example, if you have fixed term contractors on the job).
In reality, committed costs may already consume much of the remaining budget – yikes. That doesn’t give you much to play with if you need to move things around.
Another issue is focusing only on current-period actuals, rather than cumulative spend and future obligations. The current month might be looking great, but if all the other months are overspent, that’s not a good big picture.
Financial fluency is a core skill for project managers, but I find that we don’t get taught it. The trouble is, you can understand it in theory and read the relevant sections of the PMBOK® Guide, but in practice, your own country-specific accounting rules and organisation-specific processes mean that it’s a bit different wherever you work.
You can start building confidence with cost reports starts with asking basic questions. What is included in actuals this month? What commitments are expected to convert into spend next month? What assumptions underpin the forecast? And are these still what we believe?
Financial fluency doesn’t require accounting expertise (thank goodness). You can get there with curiosity, a willingness to ask questions, and regular engagement with the numbers. Book a monthly chat with your project finance person. The more comfortable you get with what the cost reports, and all the other financial reports, are telling you, the easier you will find it to manage your project budgets and answer questions about the money side.
Posted on: May 25, 2026 12:00 AM |
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