Project Management: Quick Tips to Stop Budget Overrun
Keeping within budget is one of the key measures of success when it comes to project management. Most companies do not have unlimited funds so controlling the budget is a key way of keeping the stakeholders happy. We have compiled 5 basic tips to help you stop the dreaded budget overrun.
1. Understand the Stakeholders’ True Desires
Making sure you do proper planning at the start means that you don’t have any unidentified goals or unrealistic expectations at the get-go. If you don’t have a good idea of what your stakeholders expect and what you will be required to deliver, you could end up with a runaway project and a budget to match. The very first step is to identify the requirements of the project and make sure everyone is reading from the same page. This must happen before you set any budget for the project so you can be sure you are budgeting for needs and not wants.
2. Be Prepared for Surprises
Stay realistic when estimating costs and always build in a margin for unexpected contingencies. There will always be things outside of your control but you will need to factor these in — things like supply chain prices, labor costs, shortages of goods or services and even a fluctuating exchange rate must be factored in. Make sure back-up plans are in place, for example, if a supplier cannot deliver, do you have an alternative ready? Being caught off guard can leak to huge budget increases so be prepared.
3. Develop Relevant KPIs
Make sure you establish key performance indicators so you can see how much has been spent and how well you are keeping within your budget. You will need to know the actual costs, if the cost has varied and how much of the agreed tasks allocated to a particular part of the budget have been completed. Look at how many activities are still planned and the cost, and think about the return on investment too — is your project affordable and have the benefits outweighed the costs?
4. Evaluate Regularly
Keeping abreast of what is happening with your budget is essential and most be done frequently to prevent an easily solvable small overrun from developing into a huge problem. Most oversight needs to be done far more regularly than you might think, so keep your finger on the pulse to prevent unnecessary expenses.
Alongside the financial budget the use of resources must also be monitored, reviewed and readjusted. The more people that work on a project the higher the cost, so it is the Project Manager’s responsibility to review staffing levels frequently. Make sure that unplanned work doesn’t creep in either, this kind of ‘scope creep’ can add huge amounts of cost to a project.
5. Good Communication
The Project Manager needs to make sure that everyone is informed of the budget and the forecasts and are held accountable for keeping as close as possible to the defined spend. Making budget planning a key part of team meetings will help keep the team focused and accurate when it comes to accounting for time worked and resources used.
And finally, remember that budgets are something that affect the team and the stakeholders equally — a good project manager is one that can deliver on time and within budget and those are the project managers who will continue with long and successful careers.
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