A project management technique that integrates scope, schedule, and cost to measure project performance and progress in monetary terms.
Earned Value Management (EVM) answers three critical questions: How much work was planned? How much was actually completed? How much did it cost? It uses three key metrics: Planned Value (PV) — budgeted cost of work scheduled, Earned Value (EV) — budgeted cost of work performed, and Actual Cost (AC) — actual cost of work performed. By comparing these, managers can calculate Schedule Variance (SV = EV − PV), Cost Variance (CV = EV − AC), Schedule Performance Index (SPI = EV ÷ PV), and Cost Performance Index (CPI = EV ÷ AC). EVM is widely used in government contracts, construction, IT projects, and defense. Values above 1.0 for SPI/CPI indicate favorable performance.
A 12-month software project with ₹60,00,000 budget. At month 6: PV = ₹30,00,000 (planned). EV = ₹24,00,000 (only 40% done vs planned 50%). AC = ₹28,00,000 (actual spend). CV = −₹4,00,000 (over budget). SV = −₹6,00,000 (behind schedule). CPI = 0.86 (₹1 spent earning only ₹0.86 of value).
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A CPI below 1.0 means the project is over budget — you're getting less value than what you're spending. CPI of 0.85 means for every ₹1 spent, only ₹0.85 worth of work is completed. Historically, projects rarely recover from CPI below 0.80.
The full EVM framework is complex and best suited for large projects. However, the core concept — comparing planned work/cost vs actual work/cost — is valuable at any scale. Simplified versions tracking budget vs actual spend and % completion vs % time elapsed work well for SMBs.
A financial plan that estimates income and expenses over a specific future period, used to guide spending and resource allocation.
A department, team, or function within a business that incurs costs but does not directly generate revenue.
The process of comparing actual financial results with budgeted or standard figures to identify, quantify, and explain the differences (variances).
The ongoing costs incurred by a business in its day-to-day operations, including rent, salaries, utilities, marketing, and administrative expenses.
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