Money, money, money: it not only makes the world go round, but it can make or break your most important projects. Planning, executing, and delivering on project goals requires extensive attention to detail and an understanding of how to direct the flow of essential resources, such as funding. These project cost management best practices can help you estimate needs and create accurate budgets that lay the framework for project success and flexibility.
What is Project Cost Management?
Executing projects costs money, of course, and managing the financial aspects requires a multifaceted approach. Project cost management involves everything from strategic budgeting and funding to controlling the flow of money throughout a project’s lifecycle.
Project cost management entails more than just monitoring the overall spending required to get the work done—it’s the necessary process of overseeing the way money is planned for, allocated, and organized so that you can produce quality deliverables within your budget. It’s an essential part of resource management in successful project execution.
5 Key Project Cost Management Best Practices
Project costs will vary greatly depending on their size and scope. While each one will require a tailored approach, here are some key strategies to know when looking at the way you manage project finances:
1. Estimate Accurately
Cost estimation is a crucial part of the planning phase for a project. Rather than estimating the total cost of a project based on the big picture, break down projects into smaller parts.
Estimate the costs and requirements for the individual tasks involved separately. The more you can zoom in on the details of the, the more accurate your estimation for the whole project will be.
2. Adapt to the Budget
It’s a fact of life that you often have to do your best work with what you are given. Don’t promise more than you can deliver with the available budget.
Adjust project scopes to match the resources you have available and avoid low-balling the stakeholders. Leave a realistic margin for adjustment throughout the project.
3. Assess Risks
One of the most important project cost management best practices is working towards a clear understanding of the risks involved in a project. Risky projects should be given wider margins for time and budget adjustments. Implement a cost mitigation plan so you are prepared to pivot if something goes wrong.
4. Update Forecasting
Forecasting helps you plan for the financial future of your company. Keeping forecasts up-to-date and as accurate as possible will help you avoid any surprise pitfalls of lack of funding.
Align your budget with the expected revenue and costs associated with your business so your project plans can be realistic and fiscally accurate.
5. Learn From the Past
There are lessons to be learned in both success and failure. After a project is completed, look at what went right and where there may be areas for improvement.
What were some unexpected costs you can plan for in the future? What safeguards or processes helped your team complete the tasks within budget?
Adapt your processes using the experiences from past projects to set your team up for success in the future.
Project Cost Management Mistakes to Avoid
Here are some common mistakes in managing costs that can lead to project delays and skew your budgetary plans:
- Adopting a reactive vs. proactive approach: It’s easier to adapt when you plan ahead rather than trying to fix issues in the moment. Accurate estimations and a long-term view of the project can help you assess risks and have processes in place for any potential road bumps.
- Lack of flexibility: Reality doesn’t always align with our plans on paper. Leave room for adjustment in timelines and resource allocation. Having the ability to adapt when things go wrong will save you the headache of overly rigid deadlines and project failure.
- Using outdated tools: Old-fashioned spreadsheets just don’t cut it anymore. Using a dedicated project portfolio management software can help you organize and understand the details of project costs and deliver accurate reports and analyses.
Master Project Cost Management & Planning with Sciforma
Having a clear picture of project costs is only the beginning of proper project cost management. Evaluating the financial details of a project with accurate, transparent reporting will help you put these best practices into use.
Sciforma gives you the tools to do all of this and more, so all the information you need to make informed decisions is at your fingertips. Get an in-depth view of project scopes with timelines, tasks, budget tools, and collaborative features that make it easy to plan for success.
Request a demo today to see how Sciforma can transform the way you work.