Seven (7) Tips for Managing Your Project Budget:
Managing costs using a financial plan is an area of vital importance for many project managers. For those that are responsible for managing project costs we have the following seven tips to make the job clearer to you.
Tip 1. Estimate costs well to start
The best cost management activities won't save you if you have an inaccurate cost estimate to begin with. You need to take the time to understand the work, determine the resources to apply to the work, and then estimate the cost of those resources. Try to get the numbers as accurate as possible. Use a Financial Plan to frame the resource needs and the cost of the resources.
Tip 2: Validate estimated costs and the budget at each milestone
As the project progresses you will know more and more about the nature of the work. As you complete each milestone, you should re-estimate the remaining work. This revised financial forecast, and the costs spent so far, will help you re-estimate the total spending on the project.
Tip 3: Manage the budget proactively
If it appears that your spending will exceed your budget, you must immediately put a plan into place to get back on budget. Don't wait until you are in too big a hole. Start looking for ways to get back on budget as soon as you start to see a variance.
Tip 4: Create a Cost Baseline
The Cost Baseline sets out all of the planned expenses and when they are likely to occur. The Cost Baseline describes the detailed spending plan, the spending rate and how the costs will be allocated in the project budget. Make sure that you understand the cost baseline and can deliver the project against it.
Tip 5: Manage financial details against the cost baseline and detailed budget
Many project managers manage their project against the total amount of budget available. Do not fall into this trap, as you will always think you have enough funds to complete the project. Instead, manage the project against the detailed Financial Plan and budget. If some items go over budget, investigate why and fix the issues. Only by managing at this level of detail can you build an accurate view of the projects performance against budget.
Tip 6: Manage expectations
Don't wait to tell your sponsor that you are likely to be over budget the week before they were due to finish. If there is a risk you might be over budget, tell our sponsor immediately. It will help you manage expectations. Thee sponsor might even be able to help you out manage the budget successfully.
Tip 7: If you need more money - ask for it
If you need more money and you have exhausted all other options, ask for it. Do not be afraid to tell your Project Sponsor that you have reached this point. There are quite often very valid reasons for needing more money throughout the project.
Managing costs is a challenging job, but always try and balance time, cost and scope to be sure that you can deliver the project scope within the estimated schedule and budget.
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