Cost management is the process of budgeting in a business, organization, or team. A cost or project manager—or someone who manages the budget—has the primary goal of allowing the company, organization, or group a better view of the expenses they’ll have to deal with to achieve their goals or targets.
If the responsibility of cost management falls onto your shoulders, you may want to know the best practices you can do to maximize the costs your business, organization, or team will need to deal with. You’re in luck today. Keep on reading below to find out some of the best practices to maximize cost management.
- Plan First
Establish your goals or targets. Identify the tasks and processes everyone needs to go through. And know and estimate each of them will cost you to reach your goals or targets. These are the primary initial steps, and most others revolve around them.
And take note: you should never forget about the stakeholders or the ones who’ll fund you. Know how much money they’re willing to provide you or how much they’ve pledged for your project or goal.
- Work Smart
The era of primitive spreadsheets is almost over. Nowadays, most project managers rely on specialized software to help them manage the project and its cost. For one, look for applications like a CPQ or configure price and quote software.
With these apps, you can minimize the time needed for estimations; have better communication with the team, stakeholders, and customers; connect it with your other management software; and ultimately, make your life easier by helping you manage the cost of your project’s costs.
- Perform A Work Breakdown Structure
Work Breakdown Structure (WBS) is a process and productivity technique in project management that aims to break down bigger and more complex tasks and processes into smaller and more manageable chunks. This can make it easy for you to estimate the project’s total cost and prevent being surprised by hidden costs you couldn’t anticipate.
- Consult People
As much as you want to handle everything yourself, you should consult your team about how many resources they’ll need to get their job done. If the people on your team or company don’t have an idea, don’t be afraid to talk with subject matter experts or people who have experience in going through the specific task or process you’re currently eyeing.
Aside from those, you can also approach vendors and get estimates and quotes from them to better understand how much money you’ll need to shell out. Plus, you can start negotiating or exploring opportunities to receive discounts or take advantage of promotional offers as if you’re dying to save resources on enterprise insurance.
- Determine Risks
Even if you perform a WBS and acquire somehow accurate estimates from your team and experts, there will be times when hidden and sudden costs may suddenly spring on you. You should always be prepared for them and the other risks that may abruptly raise the costs your project will demand from you. Additionally, always have contingency or reserve funds ready.
- Be In Control
There are sudden, unavoidable costs, and there are costs caused by some people making last-minute changes. The former is inevitable—as stated—and the latter is preventable. It’s common for teams and companies to suddenly make and request changes that can quickly require additional resources and funds to be used on a project.
You must prevent and control those events as a project or cost manager. There’s a reason that there’s a plan. While there will be times when changes and additions to the project will be needed, you only need to give in to them after careful consideration. Don’t just always give the OK signal willy-nilly.
- Monitor Your Current Spendings
As projects proceed, there will be times when you’ve underestimated some costs. While you may be off by a few dollars, these few can quickly add up if you don’t monitor your current spending.
When managing a project, don’t constantly compare your project’s predicted and actual expenses. If you’re already overspending, you may want to get hold of the reins and tighten your purse strings. You may want to look for discounts and ways to correct your expenses too.
In addition, apply cost optimization. This is the process of finding and eliminating wasteful spending in your project. Any method that eats up resources but brings little to your company or efforts should be removed or replaced.
For example, instead of hiring a costly single graphic designer to perform a hundred marketing pieces of marketing material, you may save more by giving the project to a firm that may offer you the same quality, faster turnaround, and cheaper services.
Conclusion
Those are the best practices you need to practice if you want to manage the cost of your project or business successfully. While it’s true that the sections mentioned are overly simplified, knowing these are enough to guide you on the correct path. And this can save you a lot of headaches and unnecessary costs.
