Managing Project Costs
Cost management is the process of estimating, allocating and controlling project costs.
The cost management process begins in the planning phase of the project. A cost breakdown structure for your project is defined to establish at what level the costs will be collected at. This allows budgets to be set and costs collected, recorded and controlled.
Without a detailed budget, you cannot effectively map out the resources needed for your project. To do this, you need to accurately estimate all costs and ensure you have the budget to cover them. This includes:
- supplier and material costs
- resource costs
- office space
- general administrative costs
Project Managers are responsible for managing costs. As part of their role, they must estimate total costs, plan the budget, monitor spend and prepare for potential risks. A Project Manager must review the spend against the estimate to ensure projects stay within budget and profitability is maintained.
Consider using the WorkSavi Commercial Form to manage your costs. WorkSavi is one of the most intuitive project management tools in the UK at the moment. If your cost items on a project form a similar breakdown to many of your projects, then you can set these up to be imported into each project to get you quickly started every time. The Commercial Form can be configured by the user who can create formulas or aggregated fields to support this process. Here estimated figures and any approved variations can calculate to a total approved budget field and when the forecast spend is deducted you have a variance field to show how your costs are performing +/- against the estimate.
When the project is being executed, the costs are carefully monitored and recorded to check alignment with the cost management plan. WorkSavi can create an API with your existing finance system to directly assign the running costs from orders raised against the appropriate project breakdown item and using our powerful reporting module, can track live estimates v costs and show variance at the line item or rolled-up sums for projects or portfolios.
On your dashboards you may decide to create a chart to focus on the projects where the spend is currently forecast to exceed the estimate, so that it can be acted upon before the costs escalate. You could also track estimate v cost for the detailed line items to determine which elements of your projects normally return a positive balance opportunity and those that typically present a negative or 0 balance risk.
The project sponsor or stakeholder will have a vested interest in keeping costs down and managed as effectively as possible. Costs exceeding budgets is a problem many projects experience, but not one that stakeholders are going to be very tolerant of. They will need clear visibility of how the projects are performing and will want to be provided with regular, up-to-date and visual reports throughout the duration of the project.
WorkSavi is more than just a tool. It offers consistency, visibility, automation, objective decision making, trust and governance.