Project management is a critical component of organizations that want to grow and develop, but it can be an expensive one. Project management costs for all phases of a project can range from 7-11% of the project's total investment cost, according to the Project Management Institute. It's no wonder, then, that project managers are constantly looking for ways to improve their cost-saving capabilities.
At the time of writing, many industries are grinding to a halt because of the COVID-19 outbreak, and cost-control is more important than ever. 63% of project professionals have already seen a considerable impact on their primary project because of the pandemic and, though things will certainly get back to normal, project managers are in a collective state of flux. However, the cost-cutting measures below can be applied during and long after the pandemic comes to an end.
Here are five project cost management best practices you can start implementing today.
#1. Better Budgeting
Project managers are no stranger to budgeting the costs of a product and they need to keep a closer eye on their finances. Throughout the life-cycle of a project, managers should reevaluate their cash flow and check whether the project is "on budget."
Here are some tips for project cost management processes when it comes to budgeting:
- Budgeting apps let managers break down costs such as material procurement, labor, wages, and other operating costs.
- Project budget templates estimate income, outgoings, and all the costs associated with projects.
- Project management software does both of the above and lets managers update costs over the course of projects. This is particularly useful at the moment as the cost of materials escalates because of disrupted supply chains.
Proper budgeting ensures project management spend is allocated to the right resources and mitigates risks. Managers who don't track finances could jeopardize their entire organization.
The latest automation tools provide project managers with a lifeline, regardless of the scope of their projects. The best programs automate many of the routine and administrative tasks associated with project management. This facilitates workflows and reduces labor costs.
There's a misconception that project management can't be automated, but this isn't strictly true. Although project management relies on many creative-orientated tasks that can only be performed by talented people, there are aspects of the job that can certainly benefit from automation, including many routine back-office responsibilities. These include:
- Submitting cost estimates
- Quality control
- Time management
Automation tools certainly require an initial outlay, but they should provide managers with a sizeable return on their investment. Research shows that, on average, across the board, automation provides cost savings of 40-75 percent, and these savings can continue for several years.
Analytics will also help managers cut costs. The best analytics tools provide managers with unparalleled insights into their projects so they can make savings that benefit the entire organization. With this valuable intelligence, managers will identify areas of their projects that they can scale back. This could cut overall operating costs significantly and free up resources.
There is a wide range of metrics that will benefit project managers. These include the following:
- Task analysis, where managers can compare current tasks with those from previous projects. This metric is useful for spotting operational inefficiencies and reducing wasted time and costs.
- Timesheet analysis, where managers can track their teams in one place for deeper insights. With timesheet analysis, managers can identify high-value members of staff who work the hardest on projects.
- Progress analysis, where managers monitor their current progress and make sure projects are on time. This means managers can meet deadlines quicker and complete projects sooner.
#4. Manage Purchases With a Spend Management System
Managers purchase various items during the project life cycle, but few have access to data about these purchases. As a result, they might overspend (or even under spend). This is where a spend management system proves useful.
A spend management system lets managers monitor their purchase and procurement workflows from one centralized system, which provides valuable real-time insights into their projects. With good cost controls in place, managers get a 360-degree overview of their business expenditure, and they can quickly identify areas for cost-cutting. Without this software, managers might miscalculate the amount of money they are spending on supplies.
As a result, users can manage spend, reduce costs, and fulfill more sales orders, especially those who work for medium and large companies. With all this powerful purchasing and procurement data at their fingertips, managers can also better negotiate contracts with suppliers, improve supply chain processes, and enhance the customer experience.
During the 2020 COVID pandemic, this kind of information could make or break the success of a business.
#5. Find Cheaper Contracts
As the 2020 COVID pandemic impacts many industries, now might be a good time for managers to negotiate contracts with suppliers and partners. It's certainly a buyer's market at the moment, and many companies will be happy to negotiate on favorable terms in order to keep business flowing.
However, managers should always re-negotiate contracts when they can, irrespective of a national crisis.
As contracts come to an end (or become suspended), managers should talk to multiple contractors and vendors and choose companies that provide the best value for money.
There's no need to rush, though. Managers should always review a company's past performance and completion rates before they sign any contract.
Managers should never presume a quote is a final price, either. Good negotiators will ask companies about hidden costs such as penalties, contract termination fees, and other charges.
During the COVID-19 pandemic and beyond, managers will likely be looking for cost-cutting strategies. With squeezed project management budgets, managers will need to budget more effectively, automate some processes, benefit from analytics, manage purchases with a spend management system, and find cheaper contracts.
The importance of cost control in project management is huge. Looking for a spend management software solution that provides you with in-depth insights into your purchase and procurement processes? Click here to create a free Tradogram account and schedule a demo!