“Project management is like juggling three balls – time, cost and quality. Program management is like a troupe of circus performers standing in a circle, each juggling-three balls and swapping balls from time to time.” – Geoff Reiss
Is Project Cost Management Crucial for The Success of My Project?
According to Geoff Reiss, one of the most renowned book writers known with his work such as Project Management Demystified, cost is one of the most important aspects of project management that every project manager needs to master. Cost helps to build main pillars of project management and it is very crucial that a project manager understands about the importance of cost in terms of management.
Working with huge amount of budget in a project presents a huge challenge for many project managers. Often times, project managers struggle to manage a project’s budget due to overspending, underestimating and the inability to foresee the economic worth of the project.
According to an article written by Daniel Threlfall which can be accessed here, a study published in the Harvard Review Business found that the average cost overrun in many projects is rated at 27%. This figure is not a relatively small figure. For example, should a project get a budget estimation of $1 million. At 27% cost overrun, this results in additional $270,000 worth of cash that needs to be spent by the company in order to complete the project. Thus, the company suffers from unforeseen loss due to project manager’s mistake in precisely budgeting the project’s need.
Benefits of Project Cost Management
Project cost management brings many benefit to project managers and their projects.
- Helps to control overall business cost
- Helps to take necessary action for different resources in the business
- Helps to analyze long term trend of a business
- Helps project managers to predict future expenses and profits
- Helps project managers to get an approved set of budget for resource purchasing
Project cost management helps to ensure project managers to precisely and carefully manage his project completion within an approved budget requested. There are four main stages that need to be mastered by every project manager in order to become more competent in managing his projects.
- Planning Cost Management
- Estimating Costs
- Determining Budget
- Controlling Costs
In the next article, we will look at how these four stages can be done in order to help YOU to overcome your project cost related issues and become a more competent project manager.