When you are managing a project, one of your myriad responsibilities is balancing the project books. You might be tempted to ask:
“Is there an accountant in the house?”
And there well may be! But whether you’re working in a large organization or with a smaller team with less resources, the need to budget and track your project costs is crucial. After all, a key metric for most projects is whether or not you came in “under budget.” If you don’t like budgeting, then it’s doubly important that you invest in building this skillset, because it means that finance is your weak spot.
So how do you manage project costs to stay under budget? The following five tips can help:
#1: Negotiation is key
When you’re working on a project, it’s not solely your team members that you’re tasking with deliverables. There are usually third-party vendors and suppliers and maybe even contractors who you’re dependent on. These relationships are defined by contracts that are very much open to negotiation.
In these negotiations you have power.
When you’re buying goods or services, especially in bulk, it is not uncommon to request a discount. Let’s say you are the first company to use a supplier’s product, by offering to provide a reference or even case study on their product you can likely get them to go down on their price.
Then there’s pricing structure. Be sure to study this. There may be areas here in which you can cut costs, too. For example, try and negotiate for a different payment structure, such as phased payments instead of having to pay for everything up front. This can help your company’s cash flow. Another option, if you have it, is to pay in cash for a discount on the overall costs.
Remember, there are options and you have the power to negotiate on everything.
#2: Get the right tools
You’ll need to purchase robust project management software for keeping on top of what your expenditures are and that can track resource allocation, too. You need to maintain a money trail, but also to manage the recurring expenses your project might require. That keeps you from cluttering your brain with scheduling regular payments.
There are some organizations that require their project managers to track the cost of resources, so you’ll want to explore an project management system with expense tracking that has the capacity to automatically calculate resource time based on the amount of hours worked and the resources’ hourly or daily rate.
Research these systems and find the one that will address all the financial issues you’re tasked with. The right tool (particularly an online PM tool) enables your team to efficiently track their tasks, and also frees your own time up so you can focus on top-level project development. The right tool can literally save you money in terms of reducing admin time across the project by simplifying resource management and reporting.
#3: Read the fine print
Look over your contracts, carefully. Are you paying for added-value services that you don’t really need? Those can be things such as insurance or project management that you are doing already by yourself. There are often hidden contractual obligations that include administrative overhead, things that you could do without and can often negotiate out from your agreement. You can even adjust your payment to a pay-as-you-go model, rather than paying for full services when you only need partial services.
#4: Evaluate resources
When it comes to resources it may sound obvious, but you have to have the right resources for the project. Just looking at the budget component of resources, think about how much money is spent on the people working on the project. If you have the right resources in place then that money is well invested, and if you don’t then you’ll be spending more and more to revise and repair that situation.
As an example, you’ll not want to ask a highly paid, highly skilled resource to complete general administration work when a temporary resource could accomplish the task at a far lesser rate of pay. Temporary resources can be integrated into your team and then managed on their departure. While this may sound like a lot of work, it’s efficient and effective. On the other hand, when you need a specialist, invest in a specialist. They know the work and can do it faster and better than someone less experienced, so the money is well spent.
#5: Consider extensions
Sometimes you have to extend your project. When you have mounting costs, talk to your project client or sponsor. You may be surprised at how willing they are to move the deadline, even if they were all about fixed milestones in the past. There may be financial advantage to delivering the project over a longer period of time. For instance, you can then spread out the costs or do more of the work in-house. It doesn’t hurt to be transparent with your sponsor and explore their flexibility on the subject.
It’s important to remember that delivering your project on or under budget that doesn’t meet the goals of the stakeholders is not a successfully competed project. Your client wants want the project done at a reasonable cost, so it’s a matter of balance. You don’t want to cut costs that will negatively impact the results of the project, that doesn’t meet the customers’ or end users’ needs. So, yes cut costs where you can, but not at the expense of the project.
For further cost management tips, watch this short video by project manager trainer Devin Deen.
ProjectManager.com offers a professional project management tool that enables you to track expenses and has sophisticated yet simple reporting features that help you know your project status at a glance. It’s easy to stay on top of your budget when you have real-time views of your project and its expenses. Take a look for yourself with a free 30-day trial.