Projects cost money. Being able to manage and track expenses is what keeps the project within a budget. Stakeholders are not likely to consider the project a success if it costs them too much. Remember the triple constraint: cost, scope and time. You have to manage all three, giving and taking from one to the other.
The following tutorial video addresses costs, specifically project expenses. You’re going to have these expenditures, but to avoid wildly overspending, you must have a system in place to monitor and track them. That’s the only way to control your expenses and in so doing stay on budget. Watch and learn how to manage and track your project expenses.
In Review: How to Track Expenses
The last thing you want is to have your pay or bonus cut because you didn’t keep to the project budget, as Jennifer learned from experience. To avoid that, she discussed six ways to track your projects expenses:
The first rule is to have a system in place to deal with your expenses and have the capacity to track them. This can be a robust project management software with dynamic functionality or something more static like an Excel sheet.
Whatever you choose, you need something to collect that data and identify who is spending what and when. This is the bare minimum and a good place to start. Without a system in place there’s no way to know where your money is going.
Provide Online Access
The next logical step is to have a system that is online. Being able to gain access to your tracking system anywhere and at any time is more than just a luxury. It has become an essential part of any project management plan.
You or your team might be working in the field or off-site somewhere. An online tool gives you access to the system, so you can add expenses there and then. Waiting until you’re back in the office means it’s more likely that something will fall through the cracks.
Identify Budget Items
A system is important, but it’s useless until you have identified the items in your budget. You need to know where the costs are going. This list varies from project to project, industry to industry, but detailing it is key to every project.
For example, you’re going to spend money on resources, such as equipment and your team; you might have real-estate costs, legal and travel expenses. All these items must be identified and listed in order for you to track their expenses. You can download our free project budget template if you need help getting started.
Create a Budget
You can probably see where this is going. It’s all part and parcel to creating a budget. You need to have your fixed and variable costs and expenses figured out before you can track them. The budget will be the umbrella under which all your project expenses will be covered.
Of course, once you’ve created a budget, you have to get it approved. This will allow you to see up parameters for your expenses and help tracking by letting you know what is permissible to spend and when those costs are going beyond what has been earmarked for the project.
Assign someone to track
A system, budget and everything related to managing your project costs are all for naught if there is not a person in charge of overseeing this process. You must assign someone from the team who is tasked with operating the system you have devised to track expenses.
This person will become invaluable. They’ll be on the front lines of your actual budget and can raise the red flag when costs are exceeding what has been approved for the budget expenses. You want someone trustworthy to own this process.
Track and Control Expenses In Real time
Finally, to streamline this process and make it more effective, you want to have an online tool. We mentioned online project management software above, and one of the advantages it has over Excel is that it’s constantly updated and reflects your actual spending on expenses. Therefore, if you notice a spike in spending, you not only have identified it quickly but now can address it before you leak value and risk busting your budget.
Pro-Tip: The use of a project management software tool or spreadsheet where you can note and track expenses is, of course, key. Also, know what has to be done, when it’s going to be done and who is doing it. If you have a system in place you can stop a fiscal leak before it becomes a deluge.
Thanks for watching!
Hello. I’m Jennifer Bridges, Director of ProjectManager.com. Well, welcome today to our whiteboard session on “Expense Tracking for Dummies.
Have you ever had your pay or bonus cut because your project budget was off track?
Well, I have. So, these are the tips that I created for the biggest dummy: me.
It’s a topic that we all pretty much – I don’t know – don’t really like. In my world, I used to have a department who managed the expenses for me. So, my biggest lesson learned is when I had to plan my projects on my own and I couldn’t rely on the organization. So after my pay was docked then I learned this quickly.
I actually made it harder than it really is, so we boiled it down to dummy terms. There are six steps that I think are important. Number one is establishing a system. By using some kind of project management software or Excel, somewhere that you can pull all of the expenses together and have some way to track it by some system and some method of how it’s going to be done, when it’s going to be done, who it’s going to be done by. So, it’s critical to have a system in place.
Number two, provide online access, not only for yourself if you’re a traveler. I mean, for me I travel a lot so I’m out of the office so I need to be able to access the expense items and the budget online, as well as my team members.
Number three, identify the budget items. So, it’s important to think through all of the budget items or the expense items that are going to be tracked on your project. You have to sit down and think about what equipment – because that’s an expense item – what people, what real estate. Are you buying a building? Are you leasing a building? Are you renting a building? Any kind of legal items, is this a marketing or this is where you have intellectual property? Something where you have contracts where you have to have legal expenses?
Then there’s travel. Those are some of the things that we forget about. When we have people on our team who travel. They’re in meetings. So, those are some of the little items that we tend to forget when we are creating our budget items.
So then, once we have identified all of the budget items and we put it in our system, whether it’s our project management software or Excel, then we go through and we make sure we’ve identified any and all fixed costs or fixed expense items or variable costs and expense items. Know, realize, which ones may vary depending upon certain things and identify those and create the budget.
Once the budget is created it has to be approved by certain parties, whether it’s your change control board, your stakeholders. Whoever has the authority in your group or organization to approve that and make sure that the budget or expense items that you plan to track or utilize on your project actually are approved.
Then, assign someone. A lot of times I’ve found where myself or different groups or teams have problems is there’s really no one assigned to track the expense items. Or if someone has ordered equipment or are responsible for real estate or the legal, there’s no one there to track that. So, it needs someone’s name, a person’s name, not just a group or organization, but an individual who’s going to be accountable for tracking those expense items.
Number six, track and control in real-time, so by providing online access to not only yourself but your team members and the people who are responsible or assigned to tracking certain expense items. Then by tracking them real-time, and then once you find something is way off budget, you’ve either over spent or you’ve under spent, then you have some way of controlling that and escalating it in a timely manner.
So, those are six of the items that I feel like are critical. Again, sometimes we can make it harder than it really is. So, if we boil it down to dummy terms it’s not really that hard. But the thing that also is helpful is to use templates and pay attention to details, details, details. The devil truly is in the details. So, if we overlook certain items then we might find ourselves, or you may find yourself like I did of being docked in your pay or your bonus, and we don’t want that to happen.
I certainly don’t want it to happen you and I don’t ever want it to happen to me again. At ProjectManager.com, we’ve tried to incorporate some of the best practices and tips for dummies for expense tracking. So, if you need any tips, tools, or techniques to help manage your expense and track your expenses then visit us at ProjectManager.com.
(This post was updated September 23, 2020)