Your guide to controlling cost in project management
By Indeed Editorial Team
Updated 29 November 2022
Published 7 December 2021
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Project managers are responsible for every facet of their projects and this includes the way that they allocate resources throughout the work. Whilst this may sound like a simple task, the size and scale of some projects lead to budget overruns and dangerously high spending that could put the company in trouble. To avoid this, it can be ideal to look for ways to reduce the cost of project management. This article explores ways to reduce costs and keep projects performing well and on budget.
Why is cost in project management important?
There are plenty of advantages to controlling costs in project management. Whether it's for immediate gain or as part of a long-term strategy, keeping spending down is integral to the way that any organisation works. If you're considering applying for a project management position or are new to the role, below are some of the key reasons for keeping costs in project management to tight budgets and why doing so is key. They include:
When you're in control of a project for a company, one of your key concerns may be keeping any cost in project management as low as is feasibly possible. Companies often engage in large-scale projects to increase their potential to make a profit and by seeing costs significantly exceeding budgets an accounting department could start to panic. Seemingly uncontrollable costs can lead to companies worrying about all of the potential profit being lost.
Furthermore, cost control in project management is fundamental to set a company's culture. If a company has a culture of fiscal responsibility but many of its projects run significantly beyond its budgets, clients might go on to question the integrity of the business and how they can trust it. Projects are one of the first things to investigate when a business is undergoing an assessment, so the ability to keep spending to a minimum is extremely valuable.
Being able to manage costs depends on an analytical review of company finances and the steps that you can take to streamline them. It requires an understanding of the fundamentals of the company and what aspects are extraneous and are not necessary for the current spending plan. By being able to reduce cost, you demonstrate that you're well-suited to management roles and have a thorough understanding of how the business is to operate, positioning you perfectly for long-term management positions.
In addition to simply saving money, cutting costs in project management means that the organisation has more to invest in the long term. This means more effective machinery for manufacturing, the ability to employ more high-quality employees and a greater budget for marketing. Saving money on one individual project impacts the wider progress of the business significantly as it offers far more flexibility with future spending on the company.
How to reduce costs when managing a project
Although we all want to do what we can to keep our costs as low as possible, it may seem to be impossible in some situations. If you feel as though spending limits are too tight or there are minimal opportunities to cut down, it can be tough to make progress. Below are some steps that you can take to reduce costs when managing a project and keep your budget streamlined:
1. Take time to assess
The first thing you do when looking to reduce costs in a project that you're managing is to fully assess the project's current budget. By reflecting on this, you can find opportunities for spending cuts that you might not have seen when initially writing out your financial plans. Furthermore, the prices of some goods that you need for the project may have adjusted, giving you even more of a chance to save money. This simple reflection period may not always yield savings, but can be a great source of.
2. Talk to the team
In addition to reflecting on what the balance and budget sheets are telling you about projected spending plans, look to have conversations with members of staff that are working on the project. Not only are they able to tell you where there is any overspending, but this plays a role in boosting the morale of the team by making them feel more involved in the process.
You can increase employee efficiency and financial efficiency by involving standard staff members in important decisions. It's important to note that some staff members have a vested interest in certain areas of the budget. Be aware of the tasks each member of staff needs to complete and where their individual biases lie to make the most of their advice.
3. Write a new budget
Once you've received all the information and advice you need, you can start writing a new budget. When writing a new budget, try not to differ too fundamentally from the initial plan as this can severely unsettle the workforce, but significant changes within the same broad structure may be acceptable. When doing this remember to record the sums that have changed between departments so you have an accurate idea of exactly how much you saved and where the major gains were.
4. Implement the new spending plan
Once a new spending plan is in place, you implement it and start practically saving money. This implementation may not be simple at first but you ensure that people rigorously stick to the spending regime you put in place. If people spend at their previous limits whilst ignoring the transition you could find yourself struggling to confirm that the spending changes were a success and you may even spend more due to the review itself costing money with no change.
5. Complete ongoing reviews
Once you've transitioned the spending into the new plan, you ensure that you continually review spending processes throughout the rest of the project. This is not only to make sure that spending is kept at an accessible level, but it can also help if you wish to further reduce spending on the project. Although reviewing your work and deeming changes to be necessary can be difficult, doing so means that the company continues to save money and that your project management is a success rather than an expensive failure.
Tips for managing costs in project management
Even after following the above steps, you might not know some steps that almost certainly can lead to cost-saving in project management. These may not work depending on the nature of the business but can offer opportunities to save in comparison to if you were to not act when trying to save on business costs. Some tips for successful cost management include:
One of the major trends in business is automation, shifting previously manual tasks into the hands of computers and automated systems. This automation saves money by leading to a one-off spend on a piece of equipment rather than having to consistently pay the wages of a member of staff. If there are any roles in the project that computers are capable of completing, consider the one-off cost of automation and how that would balance the books against having to pay a staff member to be on site.
Rather than needing to change anything about the shape, structure and procedures of the team, looking to improve efficiency in your project saves significant sums of money. By saving materials, time and resources on the project's work, you can avoid paying more for further resources at a later date. This saves a significant sum of money for doing the same work in a slightly more efficient manner. This is also a good way of saving money without affecting morale, as the team isn't required to deal with fundamental changes to their work.
Fear of failure is a fundamental part of the project management process and many managers are afraid that their work may not be successful. Rather than refusing to acknowledge this fear, you can embrace it and use it to keep your attention on the project's financial condition. Keeping close tabs on any aspects you have concerns about can not only abate your fear but show you early signs of problems so you can resolve them before they develop into worse situations.
Disclaimer: The model shown is for illustration purposes only, and may require additional formatting to meet accepted standards.
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