How A Lack of Insight Into Time Tracking Maxes Out Your Project Budgets
“We’re over budget.”
If you just felt your stomach give a familiar flip-flop, you’re in expensive company. Cost overruns are a way of life when it comes to project management, and most project teams have certainly found themselves on the wrong end of a set budget. That’s normal.
But the price for constantly going over budget is steep — both literally and figuratively. Sooner rather than later, these bad habits are going to start affecting your bottom line. Taking the time to identify the reasons your employees keep maxing out project budgets is the first step in realigning your organization’s budget management for success.
Let’s take a look at what your organization could lose when you don’t stick to the budget and some of the most common explanations for cost overruns.
Importance of Budget in Project Management
From start to end, all projects are tightly woven around budgets. The project cost estimation helps to optimize resources, operations, and activities involved in a particular project. A miscalculation or poor judgment results in project failure. According to FinancesOnline, 28% of project failures are because of erroneous cost estimates.
A poor project cost estimation has negative consequences when it comes to fulfilling the client’s expectations. Your credibility is affected negatively when you fail] to deliver the agreed-upon assets with good quality.
What Causes Cost Overruns
The scope lays the foundation for a successful project and promotes accountability on all sides by defining the deliverables, constraints, and touchstones for stakeholder and client approval. As the road map for a project, the scope must rely on historical information to facilitate planning and decision-making while being flexible enough to adapt as new information emerges.
Although the scope should expect to accommodate some changes, there is such a thing as too many and too often. This can lead to the dreaded “scope creep” — when modifications, requirements, and requests outside of the original plan continue unabated. Unexpected costs can easily add up, decisions may need to be reversed, and resources will struggle to keep up with the abrupt twists and turns in process, schedule, and budget. Setting the right expectations from the outset is a critical part of effective project scope management and provides project teams with a reliable reference for cost estimations and other anticipated finances.
Winning the bid can be grueling work, but sit tight because now the real work begins. Your organization relies on accurate metrics and streamlined processes to inform the next steps, but they don’t exist in a vacuum. Behind every metric is a story, and project managers must also understand the what, why, and how for each one. This is not a one-person job, however. The cooperation of finance, sales, operations, and other teams both within and outside of the organization will be critical in maintaining consistent data and ensuring the client doesn’t get any unwelcome surprises down the road.
Conscious and deliberate communication and cooperation efforts can enable collaboration and reduce project manager migraines by offering accessible project cost estimation/budgeting documentation, flexible billing and costing plans, comprehensive contract modeling, and easily monitored process adherence.
Missing the Right Resources
Even with the best communication, a successful project still needs the right people for the job. Maintaining an up-to-date skills, experience, and certification database will be indispensable when designating who has the right expertise. Project managers should also be asking: Where is this resource? What is their rate? Are they available? Missing the answers to any one of these questions can easily provoke a domino effect of confusion if you’re not careful. If their rates are too high or teams have to scramble to replace someone going on vacation, a project’s ability to be on time and on budget can be threatened.
Assigning the right resources at the right time can be a major challenge without an effective resource management process in place. Ensure your resources are available to support project goals, and clearly identify team members to help set expectations.
Lack of Real-Time Insights
Without real-time visibility into the work being done, critical decision-making grinds to a halt. Reporting and subsequent analytics have to work that much harder to distill useful data for interpretation. For example: Are time and expenses being tracked? Can they be easily submitted remotely or during off-peak hours? Projects happen in real time and keeping pace with clients, billing, and time should be no different. Organizations that fail to be mobile-ready and keep resources and managers informed with notifications and alerts ultimately leave the project in a sticky situation.
Staying within budget is significantly easier when employees can capture time and expense information anywhere and any time. Today, solutions offering native mobile app capabilities are a necessity when it comes to enabling employees to improve expense accuracy, eliminate submission and approval delays, and keep everyone on the same page regarding costs.
Not Relying on a Single Source of Truth
Amidst all the discussion around cost estimation and budgeting in project management, it’s important to recognize that tracking business metrics is actually part of a larger framework that requires coherence. Time is the unifying factor here, as it directly impacts all metrics and provides valuable insight into work being done. Not having a single source of truth for time can quickly result in maxing out your project budgets.
Visibility into every minute of resource time can give the project manager a sense of what work remains, how much time is estimated to completion, and whether any potential roadblocks could cause a disruption. With everyone on the same page, stakeholders such as supervisors, project managers, clients, and others can be included in the approval chain.
With resources as the largest operating expense for most project-based organizations, you don’t want to be left guessing the details about this particular cash outflow. Do resources know what projects they have been allocated to? Can they easily find out? Are they aware of what work they must complete and how much time they have? Underutilized resources cost the same as busy ones, while overburdened team members grow increasingly frustrated and threaten the quality of service.
By analyzing historical data, businesses can anticipate seasonal downtrends in productivity, identify tendencies in employee absenteeism, and take proactive steps ahead of time. Managing allocation with key metrics sets the stage for success and avoids hasty reassignments in case of unavailable team members.
Failing to Learn from Mistakes
Mistakes happen, and it’s not defeatist to admit that there’s always next time. As a business leader, it’s important to take note of these mistakes to better prepare your business for when the same issues inevitably reappear. If you don’t, you might as well call it quits from the outset.
To truly enable effective project budget management, ground all critical decisions in experience and reality. Yes, some projects will go over budget, but it doesn’t need to be the norm. Equipping your organization with the right solution for your unique requirements will ultimately lay the foundation for a streamlined workflow, smarter budgeting, and, most importantly, happy customers.