5 tips for effective project cost management

There’s no doubt about it – a successful project is underpinned by how well you manage its spend. Not only will your initiative get the best possible results when you budget for the right resources, but you’ll also mitigate risk by ensuring it won’t be derailed by unforeseen expenses.

However, effective cost management isn’t always easy to achieve. Inaccurate estimates, insufficient resources and outdated technology can threaten even the most well-intended plans, leaving you with a project that can’t cover the outlay needed to achieve its goals.

Cost management is right at the heart of iplicit’s world. Our powerful accounting software helps projects to prosper with effortless budgeting, tracking and analytics -- empowering finance directors and their teams to maximise efficiency.

We’ve plenty to share on the topic, so here are five tips to make your cost management more effective with almost immediate effect.

1. Create thorough project costing estimates, considering every stage and activity

Budgets and costing estimates can sometimes feel a bit ‘chicken and egg’. Can you make a head start on creating estimates if you don’t know what your final, signed-off budget will be?

To ensure that you won’t be hamstrung by a budget that’s objectively too small, it’s often best to create full costing estimates in advance. This should at least give you the power to negotiate the most effective budget, based on your research.

Historically, project costing estimates meant a lot of manual work. Not only would your team spend hours researching reams of prices, but this explorative process would often be underpinned by nothing more than a mammoth spreadsheet.

Although your numerous formulae are intended to do most of the heavy lifting (at least when it comes to the calculations), their output is only as good as the human input. With multiple people adding data relating to numerous resources and project stages, you’re only one keying error away from a serious miscalculation that could jeopardise your whole project.

Of course, you r raison d'être is to stop mistakes from happening. But they’re more likely to occur if your old legacy software is giving you different versions of the truth. And if you’re having to resort to manual rekeying and spreadsheet workarounds to make all the numbers stack up.

Project accounting software is designed to alleviate these woes with a complete solution to obtain and manage costs. iplicit’s resource and project management software, for example, will centralise your key information and pull in data from existing systems to avoid duplication. All the while, this data can be cross-referenced and reported on with ease – giving you the insights you need to create estimates with confidence.

2. Specify baseline and monthly budgets, signed off by the budget holder

Once you have your cost estimates and a signed-off budget, the project plan can really start to come together.

To help keep the budget under control, splitting it into a monthly spend will help you to track and monitor progress – piece by piece – until the project is complete.

If you’re using a spreadsheet-based system, keeping tabs on the monthly spend is likely to prove tricky. For example, physical receipts will need to be stored and logged somewhere (ideally not in a desk drawer, never to be seen again). This also assumes that whoever made the purchase remembers their responsibility to log the information in the right place, at the right time.

iplicit’s software is designed to help you calculate WIP quickly and easily, in one simple, collaborative system – so you needn’t worry about rogue paperwork or forgotten tallies.

Whether you want to create individual projects (such as a monthly budget plan), set deadline dates for your team to submit their expenditures, or issue reminders, iplicit has the tools required to help you stay on top of monthly budgets and make sure your baseline is protected.

3. Develop cost control processes, such as how timesheets and expenditures are signed off

As discussed above, working to an agreed baseline and sticking to a monthly budget really is a collaborative effort. You need everyone to be logging their spend in the right way, as well as actually remembering and committing to that process in the first place.

Developing cost control processes is one way of keeping everyone on the same page, by agreeing exactly how sign-off works.

Having a transparent record of not just how much money was spent – but where and why – is extremely important to rationalise a project. For example, charities often handle multiple resources, across multiple projects and sometimes in multiple locations. A core requirement is to be able to show donors how their money is being spent and what you want that spend to achieve.

Businesses have a similar need for visibility, albeit in a different context. When you juggle multiple clients, resources and projects, you need to clearly identify which projects bring you the most profit, and which resources are most efficient.

Cost controls will help you to ensure that everyone understands how and what data needs to be provided – and iplicit’s software takes away much of the effort required to turn that data into meaningful insights. Furthermore, it’s available on an easy-to-navigate dashboard, any and every time you need it.

When you use iplicit’s software to manage your cost control processes, authorisation and workflow control is built in. This means that submissions and requests will become an automated process, eliminating paper-based workflows dependent on emails, colour-coded sticky notes or verbal requests. All stakeholders can access the core system, but permissions are assigned on a per-user basis –protecting data security and privacy.

With critical information at your fingertips, the cost control process is made transparent for users – with signoffs that are quick, safe and accurate.

4. Record actual costs to compare with your budget and update forecasts accordingly

Projects don’t always go exactly to plan – and the same can be said of the costs alongside.

When tracking your spend, it’s important that these observations are reflected in your budgets and forecasts. This could mean a continuous series of adjustments over time – and the more frequently you can check in and monitor progress, the better.

However, manual costings can be a barrier to this level of precision. As we’ve discussed, getting the data together on a spreadsheet-based system is arduous and it’s only natural that this results in less frequent or granular analysis of the facts. Project costing that should really take place daily or weekly, rolls into monthly and before you know it, WIP starts to look more like speculation, with over-spending spotted too late or not at all.

With iplicit’s project costing software, you can understand projects in detail by enabling key people throughout the organisation to manage and obtain real-time views of costs, commitments, time spent, current forecast and profitability. Furthermore, the software makes WIP a breeze with straightforward resource management and flexible reporting.

5. Communicate with key stakeholders, so project progress is understood

When you record and forecast your project costing thoroughly and frequently, you’ll have a full and unfaltering overview that allows for continuous, measured amendments which keep your whole project on track.

When you actively and frequently communicate this progress with your key stakeholders, it will be clear to see which project elements are working well (and which ones aren’t). This could allow for, early intervention where needed, identifying increased possibilities to further the project’s impact– as well as lucrative opportunities for additional income.

iplicit’s costing software allows companies to maximise their outcomes by putting profit and loss data in a centralised system, where those with granted user permissions can bring their project expertise to the table – without needing to use resources designated only to the finance department. Real-time cost management and decision making is easier than ever, with key stakeholders able to access the information they need to make vital contributions based on a single version of the truth.

iplicit’s cloud finance software makes effective project accounting easier and more productive than ever, for commercial businesses and charities alike

The unique functionality of the software brings company-wide teams together, allowing critical financial decisions to be made with ease – helping projects to succeed.

Of course, the best way to discover the true benefits of iplicit’s award-winning finance software is to try it for yourself. Book in a Discovery call and we’ll show you the product’s key features.