Project management, by its very nature, has a lot of moving parts. With a lack of planning, these parts can soar out of control and cause the project to far exceed its budget.
As we’re sure you’re aware, clients see going over budget as a failure.
Therefore, project expense tracking is one of the most valuable skills that a project manager can learn. If you prove your prowess in monitoring a project and sticking to a plan, you become project management royalty to clients. Here are some tips for effective project expense tracking.
1. Create an itemized list
As part of your pre-project preparation, you need to identify all the items to track. This will involve a lot of meetings with departmental managers who will have to pull their weight to provide a reliable list.
Once you’ve compiled everything together, your itemized list will be what guides you as you create a budget. Run over the list with your middle management to see what is a “must-have” and what is a “nice-to-have”. Identifying these at the outset will save your bacon later when you have to slim down your budget. Make sure to include every aspect of your project — it’s not just about special equipment you need to buy in.
Think about site rental, legal expenses, travel costs, and payment for third parties. Put simply, anything that costs money goes on the list. An itemized list is the first step in effective project expense tracking because it works like a shopping list. If it’s not on the list, it doesn’t go in the cart. This way, you only have to worry about what is in front of you and you can develop reliable budgets for all your stakeholders. When the time comes to monitoring costs, you won’t have any surprises and you can plan your tracking approach from day one.
2. Don’t forget your employee workload planning
When you’re busy tracking all the unusual elements of your project, it’s easy to forget your staff costs. This should be one of the first items on your budget, but it’s not necessarily a fixed expense. To get started, you need to estimate your employee workload — the time every task will take.
Adding these all together, and making sure they fit chronologically, allows you to budget your team’s time correctly. However, things get a bit trickier when you need someone to work overtime. Asking a team member to stay late might be great for keeping your project on time, but it also means that your budget will start to creep up.
Therefore, your project expense tracking needs to accommodate estimated overtime. But how do you calculate that? As you progress through projects, you can use time tracking tools to measure the expected time taken against the actual time taken. For a broader picture, pull out weekly analysis to get a broader overview of where tasks are running on too long. Part of your tracking should be to address these issues and reallocate resources as necessary to stick to your budget. Moving forward, you can update your time estimations and reduce the amount of overtime, and therefore extra pay, needed.
3. Write up a risk management assessment
No matter how much you try, you’ll never plan a major project that avoids all potential hiccups down the line. There are simply too many factors at play. From relying on external providers, hoping everything is delivered on time, and praying that all your licenses are awarded with no questions, there’s always something that can trip you up.
While you can’t plan for every eventuality, you can have a pretty good go at it. A risk management assessment helps you take your planning to the next level by including as many things as possible that can go wrong.
Some of them will pose too much of a risk — avoid these. Others are essential, but quite risky — create a contingency plan, just in case. As part of your risk management assessment, include a combined calculation of each plan. By adding these to your budget, you add a degree of flexibility to your project expense tracking. Rather than heading to panic stations when you need to change your approach, you can turn to one of your back-up plans which has already been factored into your cost analysis. Be aware that adding every single risk scenario to your budgets may mean you put off your clients with high prices. Not everything will go wrong, so be smart and hit the balance between appealing and realistic.
4. Lay out your provisional budget
Simply having an itemized list of what will cost you money is not quite enough. Once you have your list, it’s time to make accurate estimates of how much each item will cost. For this, you’ll again need to call on the help of your departmental managers and external collaborators, who can price each aspect of your itemized list. All of these combined will make up your overall budget. One of the project expense tracking best practices is to break down your project into stages, each with a corresponding budget. This way, you end up with more digestible parts that are easier to present to your stakeholders, increasing your chances of approval.
Segmenting your budget also makes it easier to track your spends as you begin your project. Rather than waiting until you reach milestones throughout your project, you can check in more frequently and nip any runaway spends in the bud before they become bigger issues.
As a final benefit of budgeting, you can use your project expense tracking software to pull out overall or stage-based budget reports. Therefore, you can quickly analyze performance at each stage and work on how to improve weak areas in the future.
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5. Get a project management tool!
We don’t care if you’re an old-school technophobe, you simply can’t do your project expense tracking as efficiently without the right software.
With a far-reaching project management expense tracking tool like Bitrix24, you can control every aspect of your plan, such as: Making estimations Calculating budgets Breaking down costs into tasks Tracking your spending Pulling out reports for analysis.You can also create custom fields that help to get down into the finer details of your project. This way, you can assign a cost for every step in your project and get a more realistic picture of your costs before you start tracking.
As your team progresses through the project, they can input the real amount spent on a task. As a project manager, it’s your job to compare these figures and analyze tasks that go over budget. By using project expense tracking software, you can get things right in the first place. This way, you reduce the risk of running over budget further down the line and make the tracking process so much easier.
However, when things change and you need to turn to your risk management strategies, you can easily make adjustments part way through your project.
6. Assign a dedicated project expense tracker
As a project manager, you’re hardly likely to have too much free time. From putting out fires in one area to planning for next steps whenever you have a free second, your schedule is not something to be jealous of.
One of the simplest ways to free up a bit more time for yourself is to delegate tasks, and project expense tracking is a perfect example.
With a bit of training and some clear expectations of what is expected, you can hand over the reins to your second in command and trust them to stay on top of things. Your project expense tracker needs to be more than comfortable using your dedicated software. From modifying tasks and sending reminders to assigning roles and pulling out reports, they have to have as good a knowledge of their software as you do.
7. Track your spending in real time
As we discussed in the section on budgets, it’s great to break down your overall estimation into smaller chunks that are much more manageable than the entire project.
However, with the right tools in place, you can get right down to the microscopic level and track your spending in real time. Rather than waiting until Friday to take out your weekly report, you can jump into your project spending tracker and see if a certain task has overspent its budget or not. It gets even easier than that! Some project management expense tracking tools allow you to set automated alerts for when a task runs over its budget.
This is a totally passive form of project expense tracking, whereby you receive relevant information without you or anybody else making any effort to get it to you. Daily expense tracking techniques like these are essential to keeping your spending under control.
Like so many of the previous points mentioned here, the focus is on identifying spikes in spending as early as possible. Our advice is to set up processes, like automatic notifications, that streamline your tracking efforts and stop your budget ballooning out of control.
8. Create regular project reports for analysis
Your project reports are what combine all of the previous eight tips into one handy guide. You get to see the projected cost of every task compared to the actual cost, the impact of your contingency plans when things go wrong, and your performance on a team and an individual level.
Project reports are an unavoidable tool in your project expense tracking because they give you insights for how to improve. For example, if you have recurring tasks that keep running over their budget, maybe somebody is underestimating their cost. With the figures clearly telling you something needs to be done, you can consult the relevant line manager and plan ways to either run under budget, or raise the estimated cost next time round.
Your project reports should come directly from your project spending tracker software, so there’s no need to click around, exporting from one platform and uploading into another. To make things even more effective, you should customize your reports to get all the essential data you need to make impactful changes going forward. For example, you can include which tasks have run over cost, what your overall expenditure has been so far, and how much you have planned to spend by now. Just like your budget is a guide at the beginning of your project, your reports act as easily understood updates for your stakeholders to show that you are sticking to the plan.
Simplify your project expense tracking
The tips we’ve laid out here include a lot of hard work. It’s certainly not easy to write up a budget or oversee an entire project. However, by equipping yourself with the right tools, you can save yourself a lot of extra work. With Bitrix24, you can put everything laid out in this guide into practice. From your pre-project planning and budgeting to your daily expense tracking techniques and overall project reports, you can store all your data in one piece of software.
Not only that, you can reward yourself with extra time by using Bitrix24’s automations. Whether it’s recurring meetings, customizable notifications, or automatic task assignment, the algorithms of our all-in-one business platform can give you peace of mind. You might be thinking: “Surely, with all these features, Bitrix24 is prohibitively expensive.” That’s where you’re wrong! And you can explore all we have to offer by registering today for free.
FAQ
What does cost tracking mean?
Cost tracking is an ongoing process that ensures a project remains on or under budget. The responsible person monitors costs at set timeframes or at certain milestones throughout a project.
How to track project costs?
Tools and strategies for tracking project costs:
- Use a project management tool.
- Assign a person to be the cost tracker.
- Analyze expenditure regularly.
- Refer to your original budget at every stage.
