Question

If a manager can predict expenses, what advantages does this provide him with estimating project cost or setting budgets, as I am not quite sure myself?

Answer 1

Manager who is able to predict expenses has following advantages:

1. Cash flows can be managed efficiently if the expenses are projected accurately
   
2. As project is chosen on merit of strong cash flows resulting in higher net present value (NPV) and internal rate of return (IRR) hence, the accurate net cash flows (Cash inflow – Cash outflow) results in better decision making while choosing the particular project

3. Expenses are nothing else but the associated cost related to project budget or cost hence proper estimation of such costs enables in better decision making and control

4. The budget planning can be done appropriately if the cash expenses are known and same can be monitored. Projected expense results in efficient control system