A project isn’t static, it’s more a shape shifter. As a project progresses through its weeks, months and years, its budget can begin to overspend. It’s the task of a cost controller to stop (or control) that before it happens. Even if your project completes on time, and is satisfactory to the business, a project that overspends will not be seen as a successful one. This is why the budget must be managed carefully by your cost team. How can we stop this overspend? Here are five tips to help manage project budgets:
1. Keep Tabs on Scope Change
Scope creep is a primary reason for project overspends. Once unplanned work begins to add up, man hours that should have been billed can begin to spiral out of control. Instead, cost controllers can manage scope change by creating budget changes. In CostMANAGER, budget changes can be raised against your budget to cover for expenditure which wasn’t initially anticipated. As an added bonus, any additional funding requested by the project via a budget change must be authorized by a project lead. This keeps scope change under control and correctly sanctioned.
2. Communicate With Your Team
A project is only as good as its team, and a team with poor communication is one doomed for failure. Of course, this means that a team that talks is more likely to see success and take ownership of their project. This ownership will fuel a sense of belonging, causing them to keep a better eye on their aspect of the project. Informal chats, as well as formalized weekly and monthly progress meetings will help glue your team together and help the project succeed.
A practical approach to try would be to separate your project down into different tasks that could be applied to a reporting structure. This gives a more ‘real world’ feel to the tasks that your project is dependant on. A group or a single cost engineer could then be assigned to a ‘branch’ of the structure. Each branch would communicate their results and issues in each meeting as the project progresses.
3. Regularly Forecast Your Budget
Never approach forecasting with a ‘do it once and forget’ attitude. Updating and managing an evolving forecast is a requirement for any project. Make it a point to discuss budget management and forecasting at your team meetings. Without control, your project will likely be destined for failure or at least major overspends. Talking to your team about upcoming spends frequently can stop it from getting out of hand before it starts. After all, a small and controlled overspend is better than a larger, unexpected one.
4. Plan For Future Resources
Similarly to updating your budget forecasts, it is important to keep track of your resource usage. The people working on a project, such as contractors, may well have their own costs associated with the project. Cost control teams should frequently review the number of staff and contractors working on a project, as the changes in their numbers will feed into future resource requirements. This information will help feed into other potential forecasts and further inform you of any future overspends on your project.
5. Manage Progress Diligently
An experienced lead cost controller will know the significance of progress and its overall effect on the project. Progress is notoriously difficult to monitor, due to the way it is defined. The idea behind progress is to record the amount of work completed against a task. This process allows you to see how much work has been completed for the amount of budget that has been spent. This means that the time spent against work becomes quantifiable and shows if the money spent to complete a task within a project equates to what you originally budgeted for. Recording progress values is core to Earned Value Management, a topic that we’ve previously covered.
Whilst the use of the above tips doesn’t guarantee that your project will be a success, they will help you to understand and control it. Remember to regularly review with your team, keep tabs on scope creep, forecast your budgets, plan for future resources and manage progress to ensure your project has the best possible chance.