Sticking to a set budget is a necessity whether in business or in personal affairs. For projects that are intended to make profits, it is all the more necessary to keep within budgets. To avoid having to request for additional funding, prudent project cost management is a must.
Project cost management starts before the onset of any project. It should be part of the planning stage. When you pitch the budget, you need to have a good idea of how much the entire project would cost. A lot of research and leg work would be required for those projects with heavy logistic requirements or those that involve third party suppliers and service providers.
Price movements could happen between the project proposal pitch and the actual project implementation. This can be addressed by putting in a little bit of an allowance or a provision for price fluctuations. The project managers need to have a keen sense of the kind of industry environment he is working in to be able to accurately estimate these provisions. It is also a good tip to try to negotiate with suppliers and service providers for a rate guarantee.
Once the project is underway, the project manager will have to ensure that the budget is being spent according to the approved expense lines. Spending money allocated for specific expense lines for other items is not a good practice. Especially for long-term projects, it is important to ensure that funding will be available to see the entire project though to the end.
It is highly recommended that cash movements are properly documented. This will provide an audit trail that can be used to track errors or issues in the future. It is also a good idea to have a finance expert on top of cost management tasks. This expert will be able to devise policies and procedures to ensure that the entire project does not go over budget.
It should be noted, however, that going below budget is also not always recommended. This could mean that you are not maximizing your resources and could cause you to miss out on more profits as well. The key to successful project cost management is to wisely spend the money based on allocation and to ensure that they result to as much profits as could be generated.