The process involves comparing the estimated cost of a project or asset with its actual earned value, typically at specific intervals. This comparison identifies any discrepancies between planned expenditure and the work completed, providing a financial snapshot of project performance. For example, if a construction project was budgeted at $1 million with an expectation of 50% completion after six months, but only 40% of the work has been finished according to value earned, this disparity highlights a potential cost overrun or scheduling issue.
This practice is crucial for effective project management and financial control. It allows organizations to proactively identify and address potential problems, such as budget overruns, inefficient resource allocation, and scope creep. The resulting improved financial transparency supports better decision-making, stakeholder communication, and ultimately, project success. Historically, these comparisons were often performed manually, but modern project management software facilitates more frequent and accurate analyses.
