In the big picture world of project management, ensuring the overall success of a project is a project manager's top priority. If a project goes wildly over-budget (as they often do), it will not be considered a success, even if it's delivered on time and meets end users' needs.
That's why project managers need to meticulously manage their budgets. Here are four strategies for maintaining control of your project budget and preventing massive cost overruns.
1. Continually forecast the budget
A project run without frequent budget management and reforecasting will likely be headed for failure.
Why? Because frequent budget oversight prevents the budget from getting too far out of hand. A 10 percent budget overrun is far easier to correct than a 50 percent overrun. Your chances of keeping the project on track with frequent review of the budget plan is far greater than if you forecast it once and forget about it.
2. Regularly forecast resource usage
Just as the budget needs to be constantly revisited to keep it on track, you need to do the same for resource usage, since the people working on a project contribute to its cost. Project managers should review the number of people currently working on a project and the project's future resource needs on a weekly basis.
Doing so will ensure that you're fully utilising the resources you have, and that you have the right resources ready for the rest of the project. Regularly revisiting the resource forecast will help keep your project budget on track.
3. Keep the team informed
Always keep the project team informed of the project budget forecast. An informed team is an empowered team that takes ownership of the project.
By keeping the team informed of the budget status, they will be more likely to watch their project charges and far less likely to charge extra 'gray area' hours to your project, hours that they know they worked but aren't sure what they were working on.
4. Manage scope meticulously
Scope creep is one of the leading causes of project overruns. As unplanned work finds its way into your project, billable hours mount and the project budget can get out of control. Project managers must carefully manage scope by creating change orders for work that isn't covered by the project's initial requirements. Change orders authorise additional funding for the project to cover the cost of extra work, and thus keep the project to its new budget.
The project budget must be a living part of projects, something project managers review with their teams and their stakeholders on a regular basis. Project managers who carefully watch budgets throughout the lives of their projects will keep stakeholders and management happy, and thus experience greater project and career success.
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