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4 Tips for Effective Project Cost Management

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Nothing in this world is free; especially not in project management. A manager has to watch the project cost carefully to stay within budget, but he also has to make sure there are enough hours available to deliver good results.

Here are some great project cost management tips for making sure your project cost stays reasonable:

1. Proper Estimates for Sound Project Cost Management

It may sound like ABC stuff in managing project costs, but many projects that go over-budget can trace their problems back to the initial planning stages. Either the project manager underestimated the number of hours a project would take, or he allowed the client to shave off too many hours in order to lower the price and make the sale.

When you build a proposal, take extra care in estimating your project hours. If possible, pad the estimate to give your team a little wiggle room in case things go wrong. If the client pushes back and tries to reduce the project cost, make sure they understand that less hours may mean an unfinished project.

The Definitive Guide to Project Resource Management

2. Choosing Right People is Key to Managing Costs

Not everyone is right for every task. Even though you try to hire well-rounded team members, there will always be areas where one outperforms the rest. Know your team′s strengths and weaknesses. Be familiar with their work habits and attitudes, so that you can accurately predict how long it will take someone to do a particular task.

This doesn′t just apply to saving on project costs, either. If you find that you′ve got extra hours, you might be able to assign a task to a newer team member as a learning experience. It′ll take a bit longer, but you′ll have given him valuable on-the-job training.

3. Project Control via Earned Value Analysis

Many project managers rely on the “planned vs. actual” system, which can predict how timely a project is, but says nothing about budget management. Earned Value Analysis is a much more effective method. It uses three factors: cost, schedule, and scope, in order to predict completion dates, future team performance and the likely end cost.

The system isn′t all too hard to adopt. Many project management tools use Earned Value Analysis as a standard project control feature, and automatically generate reports based on the data that your team puts in (hours billed, tasks, project schedule, etc). The reports can give you a priceless snapshot of how things stand in terms of project cost and schedule performance.

4. Less important things come second

When one of your team members gets bogged down in a task, ask yourself this question: “Is it essential to the project as a whole?” Many project managers employ the “critical path” method, where there is a “chain” of tasks that are an absolute requirement for the project to be considered complete. If the problem is for a secondary (or even tertiary) task, you may be better off shifting to something else and coming back to it later–even if it means setting a whole chain of secondary tasks aside.

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