6 steps to keep your project budget on track

6 steps to improve your project controlling

Financial project management can be a real challenge. Especially if you have several projects ongoing and several people are involved.

Follow these steps to keep track of cost in projects, and your financial project management will be on auto-pilot!

1 – Set up a budget with a good cost breakdown structure (CBS)

Breaking the budget down into good cost breakdown structure (CBS) is important to get the most out of your data. When defining your structure, think about why a certain structure is important for you.

The CBS is often aligned with the Work Breakdown Structure (WBS) in a project.

You can read more about Cost Breakdown structures here.

Establishing a good cost breakdown structure will not only provide you good insight during the project but can also be valuable in estimating your next project if you are in the business of delivering recurring similar projects.

2 – Identify risks and opportunities

Identifying potential risks is important to ensure you do what you can to mitigate and keep on the radar through-out the project. At the same time, it is also important to be aware of potential opportunities that can have a positive financial impact on your budget.

Examples of these can be:

• Scope risk – risk related to contract scope resulting in increased cost, re-ordering, and project delays
• Estimation risk – cost related incorrect estimation or out of scope
• Timeline risk – risk of delay resulting in liquidated damages
• Currency risk – risk related to fluctuations in major currencies

3 – Track commitments

 Tracking commitments means that you measure cost against budget from the point of time you commit to cost, typically at the point of approving a purchase. The main benefit is that you then know exactly how you are performing against a budget at all times and will see potential overrun earlier than if you were measuring based on actual cost (i.e. Invoices)

4 – Choose the right tool

There are certain features that are important in projects that are usually not covered by the accounting system and hard to manage in excel.

Some of these might be:

• The ability to set up a proper Cost Breakdown Structure (CBS)
• The ability to track committed cost (not only invoices). This is essential, especially the longer time it takes from cost it committed until the invoice arrives.
• The ability to approve cost before you commit. Approving cost before it’s committed is not only good governance, but will ensure that you don’t make mistakes
• The ability to share information with my team. Often several people have various needs when it comes to spend, budget status, delivery dates and so on.

These are essential questions that can make a big impact on how you can get control on your project.

5 – Assign accountability

Make sure your team is aware of estimates and risks so that all buy in to what is required to deliver the project on time, quality and cost. Providing visibility will help your team knowing where the project stands which key to making sure all feel accountable. What gets measured, gets done.

6 – Take control

So, with the right tool in place you can easily track your commitments which will be placed on the relevant budget category and automatically matched with invoices from your accounting system always providing you real-time cost control with zero manual effort!

This means that you can spend time on value adding proactive decision making rather than spending all your time on trying to tie together data from your ERP system and “what is still out there”.

CostTracker is a cloud-based purchase order system designed to make cost control easy. The system includes unique features for project-based companies. CostTracker is designed to be easy to use and get started with and can be used a stand-alone or integrated with your accounting software.

CostTracker provides cost control to hundreds of companies all over the world.

Other relevant articles:

5 reasons to use purchase orders in your business

Benefits of using a purchase order system