You can determine what’s reducing your profit margin by accurately measuring your costs. We are introducing the eagerly awaited retrospective cost linking option with this release, enabling you to track and manage project-related costs at the most detailed level.
Cost tracking is a crucial component of project cost management and spending control. As a result, you can only track costs effectively by considering budgeting and other pertinent cost management techniques.
To secure the business’s financial health, it is essential to develop an integrated approach to control costs. In this blog, we will discuss a few steps to help you with cost tracking.
Why is cost tracking important?
A significant threat to the success and durability of the project is budget overruns. Overruns have many different root causes, but they can all be boiled down to one thing: a lack of control.
Cost tracking is precisely what you require to avoid this issue. The word “track” means to carefully observe, notice, and record all events, changes, and trends during an event. In other words, when tracking project costs, you maintain a thorough record of each spending item. If done right, cost tracking can give you a strong sense of control over the issue that no other method can match. To do it correctly, integrate cost tracking with adequate budgeting and project management activities.
How Should a Cost Tracking Process Be Set Up?
1. Provide precise cost projections and a realistic project budget.
You must ascertain how much money you have available and how much is needed to complete each project activity before you can begin to track expenditures. Without this information, you lack a foundation for cost control and a specific goal to work towards.
As a result, forecast and calculate costs using one or more of the available cost-estimating methodologies. Also, don’t prepare a project budget, which is a comprehensive list of all the expenses (and income) you may reasonably anticipate accumulating over the course of the project.
The cost monitoring procedure will refer to the budgeted estimations as a starting point. Because you are aware of the financial constraints of your project and are therefore better able to control and prevent spending excesses, the likelihood of cost overruns decreases the more precise and trustworthy your forecasts and budget are.
2. Discuss project costs and expectations with team members.
Since staff performance is directly related to the project’s financial outcomes, it is crucial to communicate individual and general productivity expectations with your team as the project is being realized. By following the budgeted estimations more closely, you will increase your chances of better project expenditure control.
3. Establish cost control roles.
Measures implemented to provide sign-off by various team members include cost limitations. Setting up controls includes deciding how much can be approved and by whom.
You increase your project’s accountability for expense monitoring by assigning cost control duties to capable staff members. Doing this may encourage greater cost tracking, budget adherence, and early identification of cost overrun threats.
4. Utilize a tracking tool.
It can be time-consuming to configure project estimates and carry out expense tracking manually. The good news is that project resource management tools like eRS can assist you with project breakdown, estimation, timetable creation, resource assignment, and team member scheduling.
eRS makes it easier to streamline the workflow and recognize if and when a project veers off course by gathering all of these things in one location.
5. Track costs and measure results.
Measuring project progress is essential for effective project expense tracking. Team members can track financial performance by project or team member and compare it to the projected budget using the eRS project cost tracking tool. Additionally, it lets you view all costs—fixed charges, one-time fees, and ancillary expenditures—in a single location.
6. Compare the actual cost with budgeted estimates.
Throughout the project, you must compare your team’s actual costs with the anticipated expenses to verify budget compliance. Three main goals underlie this kind of cost analysis:
- the modification of spending habits to avoid cost overruns and increase profits;
- evaluation of the effectiveness of your cost management strategy in general and of cost estimating and budgeting in particular;
- Final evaluation of the project’s results.
7. Updating the forecast.
You might need to adjust your initial forecast as your team continues to work on the project and as you keep tabs on project costs using various technologies. Keep your stakeholders informed and choose the best course of action as we advance, whether because the costs are too high or lower than anticipated.
In some instances, you’ll have an extra budget and the means to finish the project sooner. In other circumstances, you may allocate the resources to a different project that isn’t performing as well. Making the appropriate decisions at the right moment will be possible with efficient and ongoing project cost tracking.
Manage all of your cost-tracking needs with the eResource scheduler.
Planning a project is not a precise science. The procedure for project cost tracking and budgeting is not either. See the battle over expenses as an opportunity to obtain as much control over the process as possible while also introducing procedures and fail-safes for maintaining a given project and moving towards the finish line in the most cost-effective way rather than as an exercise in futility.
Although project planning cannot be guaranteed, cost tracking can be a potent tool for positioning your business to reduce unpleasant surprises. It also creates the framework for the most significant outcomes, mainly when you use time-saving project-tracking tools.
Use eRS for a 14-day free trial to start using the power of financial and time tracking and budgeting for your company with the best project and resource management software.
