Project Management Templates and Managing Costs

Project Management Templates and Managing Costs

You may have heard that most projects today, fail to deliver “within budget”. As a Project Manager (using project management templates), this is your most difficult challenge - to produce your project deliverables within the original budget specified. To do it, you really need to take these:

3 Critical Steps to Managing Project Costs

To manage costs effectively for your project (as part of financial management), you will want to implement a Cost Management Process. Cost Management is the process of monitoring and controlling costs (i.e. expenses) within a project. By recording and monitoring the day-to-day costs in your project management templates, you can:

• Calculate the total cost of undertaking project tasks
• Determine the total cost of staff in the project
• Monitor the total actual cost vs. forecast cost
• Easily identify current and potential cost overruns

Cost Management is comprised of a set of processes, roles and documents for monitoring and controlling the costs within the project. Some examples of cost types include:

• Labor (staff, suppliers, contractors and consultants)
• Equipment (computers, furniture, facilities, machinery)
• Materials (consumables, engineering materials, water, power)
• Administration (legal, insurance, lending and accounting)

There are three critical steps to managing project costs effectively. We’ve described them here for you:

Step 1: Document Expense

The first step is to identify the actual costs incurred on the project, by using Expense Forms within your project management templates. All managers, team members, staff and contractors should complete Expense Forms whenever they incur a project expense. Expense Forms allows team members to record the: 

• Date upon which the expense occurred
• Activities against which the expense was incurred
• Type of the expense which took place
• Expense amount and payee to whom payment is made
• Invoice details relating to the expense

Step 2: Approve Expense

The Project Manager then receives the Expense Forms and they review them to determine whether the expense: 

• is related to a valid project task
• was budgeted for, in the Financial Plan
• is unbudgeted but fair, reasonable and affordable

Based on this assessment, the Project Manager will decide to either:

• Approve the Expense Form and arrange payment
• Request further information regarding the expense
• Decline the expense and raise an expense issue

In most cases the Project Manager has the authority to approve all budgeted expenditure; however unbudgeted expenditure over a certain limit may require the approval of the Project Sponsor. 

Step 3: Update Project Plan

Following expense approval, the payment of the expense is scheduled. The payment details are then recorded in an Expense Register. During  the Cost Management Process the Project Administrator keeps this register up-to-date. On a regular basis (typically weekly), the Project Administrator also updates the Project Plan with the information provided by the Expense Register, in order to: 

• Identify the total cost of each project resource and task
• Calculate the total actual vs. budgeted cost of the project
• Identify any instances of under or over spending

And there you are. By taking these 3 simple steps using your project management software, you can improve your cost management processes, helping you to deliver your project within budget.