Dealing with costs, while not the most exciting portion of project management, is certainly one of the most interesting to the sponsor and doubtless to a great majority of your stakeholders. Although you may find cost planning tedious, having an accurate cost estimate will make life a whole lot easier when you start project execution.
Cost planning includes all of the processes to identify what you need to complete the project and what the costs will be. Resource planning is the process of determining what resources you need on your project and the quantity of each resource. Resources include people, equipment, and materials. Cost estimating is the process of determining what you will spend on the work required to complete your project. The accuracy of a cost estimate can vary depending on the type of estimate you are using.
Numerous techniques are used to create project estimates. Analogous or top down estimates use expert judgment and historical data to provide a high level estimate for the entire project or a phase or deliverable. Parametric modeling uses a mathematical model to create the estimates. The definitive method creates the project estimate by adding up individual estimates from each work package.
Cost budging takes the cost estimates and allocates them across the project schedule. A cost baseline is produced to use for forecasting and tracking.