The ABCs of Project Cost Management

Money can be stressful. Let alone when you're trying to track money on a project, ugh. Well, I'm going to share with you some of my techniques on project cost management to help you on this.

Now, if you really want to master your project management skills, stay tuned to the end of this video 'cause I'm going to share with you how you can get your hands on a guide on how to ensure your projects don't fail. Hi welcome, my name is Adriana Girdler and you've landed on the best practical project management channel. Out there in the universe, YouTube band.

Wow, my personal opinion, and I hope you agree. And on that note, I hope you subscribe 'cause it really tells YouTube we're doing a good job on your love and the content. Now, on that note, do you want to learn more about project cost management?

Well, let's get to it. What is project cost management? Well, project cost management is the process you use in order to manage and control and monitor your costs.

This includes estimating, budgeting, controlling of the costs that were given to you for you to execute the project. And project cost management is ensuring that you stay within those boundaries. Why does cost management matter?

I hope that doesn't sound like a really silly question, but you'll be surprised. Some people don't actually even understand what their budget is for their project. And it does matter, because in project management it's all about your scope, time and budget.

Now, if you're not managing your budget or you're not understanding what your costs are, it can really have a huge impact on your timelines. Because if you need to have, do more things you may have to extend your timeline. It's a big impact when it comes to risk because you may need to have, you may have some risks that pop up and you need some contingency planning but that contingency planning may be linked to monies.

So you can't do it 'cause you don't have a budget or you don't understand your budget or you may have to rearrange things and maybe do things slightly differently, but are still within scope. But because of budget, it's dictating you to do that. So understanding your budget whether you manage it or not, because on some projects a finance person maybe managing that, but they have to be working with you so you can understand what exactly do you have left, how much is given.

So you can understand it in the greater picture of managing your project and the other elements that pop up, right? So that becomes important that you understand that, as well as it's important for resourcing too. Okay, let's get the first most obvious thing that you do with cost management out of the way, that is track your spending.

Okay, that's a given you have a budget, it doesn't magically get tracked on its own, someone has to track it and that's what you need to do. It just allows you to understand here's my baseline, how much have I spent to date and where are we in the project timeline and what do we have that's being called out against it. And are we okay or do I need to actually go and ask for more monies?

So that tracking your spending becomes a very critical activity that you have to do for project cost management. Maintain good time management. What Adriana we're talking about project cost management.

I'm like, yeah, I know, that's why I'm telling you to maintain really good time management. What did I say earlier on about scope, time and budget? These are all linked.

So you really need to, as part of your cost management is really have, it's to have really good time management. Time and money go together. If you extend your project time I promise you, you need more money in order to help you do that.

So it becomes really important that you keep not only track of your spending, but you keep track of your timing because there is a direct correlation and relationship between the two. So really good time management also equates to really good budget management. Plan for contingencies.

Okay, with cost management within a project. As I said in the earlier tip, things are going to pop up. You need to ensure that you have contingency planning funds in your project budget.

And you need to understand that from a risk perspective of your project because if you're doing really good project management, you're doing some initial risk assessment, and we have mitigation and contingency plans for risk assessments. In fact, what we want to do is if risk does come to fruition, what do we have to do to minimize that impact? And I wish to say things were free and they're not, there's usually some sort of cost associated with it.

So you need to ensure that, with your good contingency planning that you're linking it to your budget. So you know what you need to ask for, or rearrange within your current budget to cover that particular contingency. Have a change control strategy.

This to me is critical on any project of any size, is how are you going to manage change? 'Cause a lot of times without you realizing hallway conversation a manager says, hey, can you just add this to your project? They don't understand that simple request could increase your budget, could increase your time, oh, my goodness, then what?

So you need to have an understanding of how to manage change and there's change control that you can implement which is directly tied into your budget. 'Cause you can nip things in the bud so they don't snowball into an additional activity that you didn't plan for. You now need resources against, you need either maybe some software, some activities that have to occur and it's not within your budget, then what do you do?

Oh, my goodness, that's the last thing you want to manage your budget, right? You want to keep it to the original cost that you were given ideally, unless something happens like a big risk and that's a different story. But that all being said, really having a good change control strategy, a way of working so you can monitor that when something does come into play how are we going to deal with it, so that you can be on top of that budget and keep your project running.

Project resource review. Projects do not happen on their own. There's no AI, Artificial Intelligence that can execute a project, you need people.

So I leave this last because I've had to help with budgets and estimations all the time. And we always look at resourcing and I struggle with this, and maybe some of you struggle too. If you have put in the comments below, give me your stories, 'cause I struggle with this.

I know why resourcing is looked at because you can estimate the amount of time a person's going to be on a project. But my struggle is this, when it comes to external resources like you're hiring another organization, a consultant, a firm, whatever they have to do a standard of work. And in that standard of work, it's usually laid out in good detail what they're going to be delivering to, so that cost is pretty much locked in.

And usually if it's going to exceed that cost, there's a negotiation that happens. And it's usually because there's an additional activity that's being requested from them. So I find managing resources externally to an organization it is actually quite easy and simple to do, because of that process of having that standard of work.

What I struggle with, is when I'm asked to estimate internal resources. Well, number one, companies don't make their internal organization individuals to do an SOW, statement of work on the project they're going to do, nobody does that. If company does let me know, I've never come across it, and I've worked with a lot of companies and a lot of big organizations.

So then you're doing this, hmm, what do I think it's going to be? And so you're usually at the beginning of the project when you're doing these type of estimations as well. So you're haven't even come across issues in the project yet that may need someone's more time.

So a lot of time I kind of guess, I think it's about 25% but here's the magic word that I now do when I'm asked to estimate on resources, it is an average across the whole project. There may be, and this is my little disclaimer, I tell them, there may be times I need that person 50% for this short period of time. And maybe I only need them 5% for the rest of the time or in certain bits and pieces but the average may be 25.

So I struggle because sometimes people will go, you said it was 25% and I'm like, well, I didn't account for this other stuff that popped up that's project, you know, one on one risks happen, things change, they evolve. But that is something that, when I do have to do resource loading and looking at that from an estimation standpoint, go higher than what you think you're going to go. Because I promise you it's going to have happened, you're probably going to have to use that person a little bit more than you anticipated.

So always going up and patting it a bit, is just going to help you in the long run. Now, that you know how to manage project costs and some of the techniques, oh my goodness, I'm going to get to it. I told you it stay to the end, and what do I have for you?

Free my gift to you. How to identify the top 10 project mistakes project managers make? Because this will definitely derail your project and potentially add more costs.

So something you want to avoid for sure, for sure. Where can you get this? Well, it's under this video in the link below, check it out.

Until the next video, see you later.