Project management is like juggling three balls – time, cost and quality. Geoff Reiss. Do you know that cost is a most important ball in project management juggle that needs to be managed very effectively? Have an idea that it requires equal percent of attention from project manager in each phase of project management life cycle (ie Initiation to Closure)?
There are 4 most effective tools recommended by many experts from different corners of the world that can be used to control costs as project progresses.
Estimate the Cost
Project managers use cost estimate at the early stages of project where they do not have much detailed information available. It can be normally used to decide the financial viability of project. There are many cases where financial viability does not matter like compliance or policies type of ventures but still presenting initial and high level view of costs to sponsors will be beneficial.
Following four major techniques are suggested to be used in cost estimation process:
- Bottom Up Estimating
- Parametric Estimating
- Analogous Estimating
- Three Point Estimating
Once got approval from initial steps, project managers move to plan the project where cost guesses need to be converted into a budget with more specific accuracy. Although it’s more precise, it’s still only a prediction. It can be developed by taking activities along with their estimated costs from work break down structure plus input from experts or previous lessons can also be considered. Project manager also keep margins to avoid the impacts of any unforeseen mistakes in valuation phase.
Monitor the Cost
As name highlights, this tool help project managers in execution & monitoring phases of project. They start monitoring spending of project against agreed finances. It helps to identify the cost flows / performances trend plus requirement to start analysis on any point can be happened on right time.
Formally, Earned Value Management (EVM) approach is being used to monitor the cost. But making EVM process of each project would be burdened. Professionals use their judgment or ask PMO or Finance team to monitor the cost.
This tool helps to financially close the project where project managers enable program / portfolio managers to ensure the achievement of financial objectives as planned and designed? Secondly, effectiveness of planned budget is assessed with actual spending of the project that might include activities like noting lessons learned in terms of cost management, which can be used in future projects.
None of the above tools in alone state can be useful while managing cost, but together they can handle cost area effectively even without going too much in detail. Love to hear back your approaches for controlling the cost in your projects. Share your story at comments or drop an email at firstname.lastname@example.org