To ensure the success of your project, you must keep track of the money you spend on it.
However, if you’re new to managing projects, keeping track of the money you spend might be a huge hassle. That’s why we made this budgeting primer: How to track project cost. In other words, this will ensure that you don’t go over your head financially.
Whatever size project or program you’re responsible for, our guide will provide the information and assistance you need to get going.
If you want to take charge of your project’s costs and assure its on-time completion, this guide is for you.
Alright, let’s just jump right in.
The money spent on a project is called “project expenses.” Before beginning work, you must have enough money to cover all of the costs. This is done during the planning phase of the project when a budget is being created.
When keeping tabs on the money you’ve put into your project, there are two key categories to be aware of.
Both types of costs are known as “expenses.” Direct costs are those that have a direct impact on the completion of your project and include things like specialized software, contractor hours, travel and meal costs, mileage, and so on.
It is important to keep in mind that direct costs might be either predictable or unpredictable.
Costs that have nothing to do with completing the project are considered indirect.
These costs are still due. They’re crucial because project managers frequently ignore them when estimating costs or putting together bids.
Rent, salaries of support employees, utilities, software license fees, advertising and promotion, office supplies, accounting, and legal fees, etc. are all examples of indirect costs.
Indirect expenses might be either set or arbitrary.
Budgeting and keeping tabs on costs is a chore that nobody likes. It hurts to put the numbers together, and you always worry that you’ve forgotten something.
But there’s no way around keeping a close eye on costs if you want to finish your project on time and within budget.
The budget for your project will flag potential problems early on:
- Does anything (work) take longer than expected?
- Have any things been bought without your permission?
- Is the money running out even though the project’s completion is still months away?
Such concerns are typically reflected in the price as well. If you’re able to catch these hiccups early, you’ll have more time to correct courses and get your project back on track.
How to Track Costs: Typical Project Cost Categories
Using several categories, project costs can be more easily managed and monitored.
Costs can be better managed if it is broken down into more manageable chunks, and this is where categorizing costs into relevant divisions comes in.
Labor, supplies, equipment, travel, consultants and contractors, overhead, legal and insurance, marketing and advertising, information technology, and training are some of the most frequently incurred costs in project management.
To complete projects on time and under budget, as well as to make well-informed choices for future endeavors, familiarity with these areas is essential.
Here we go specifically:
This sum includes all compensation for project workers. Due to their high proportion in the total project budget, these expenses must be meticulously tracked.
That is required to finish the project, including all tools, hardware, and supplies.
Due to the potential impact of fluctuating costs and limited supplies, accurate record-keeping is essential.
Costs of tools and machinery, whether hired or purchased, are included here.
These expenses can add up quickly, especially for projects that need expensive, specialized tools.
All costs associated with official project-related travel are factored in here.
They can pile up rapidly, so it’s important to keep tabs on them.
5. Consultants and Contractors
How to track project costs: consultants and contractors.
The costs associated with bringing in other parties, such as consultants or contractors, to assist with the project.
These costs can eat up a sizable chunk of the budget and alter depending on the scope of the project and how far along it is, so keeping tabs on them is essential.
Rent, utilities, and office supplies are all examples of indirect costs. Overhead expenses can add up quickly, so it’s crucial to keep tabs on every penny.
7. Insurance and law
How to track project costs: Insurance and law. This tells details of costs associated with procuring the necessary legal representation and insurance coverage for the project.
These expenditures should be tracked attentively due to their potential unpredictability.
8. Communication and promotion
The costs incurred to publicize the project or its outcomes.
For initiatives with a sizable audience or set of interested parties, these expenditures can quickly add up and must be monitored closely.
All the money is spent on the computers, programs, and other tech that will be required for the project to be successful.
It is important to keep a tight eye on these expenses, since they may quickly add up, especially for projects that call for expensive, specialist equipment.
It includes the costs needed to train project staff or other stakeholders. It is important to keep careful tabs on training costs, which can add up to a significant sum for projects that call for uncommon expertise.
Some people have learned the hard way that failing to stick to the project budget might result in a reduction of their salary or bonus. Then how to track project costs?
Here are six methods to keep tabs on your project’s costs and avoid that unpleasant scenario.
1. Set up a system to keep tabs on expenses
The first guideline is to establish some sort of method through which you can manage your finances and keep tabs on your costs.
Strong, feature-rich project management software with dynamic capability is fine, but so is a static tool like an Excel sheet.
No matter what method you wind up using, you’ll need some way to keep track of costs so you know who’s responsible for what and when.
The majority of modern project management tools have a dashboard that provides an overview of the project’s progress.
Dashboards for managing projects typically show metrics like budget, tasks, and time spent on each.
Your financial well-being cannot be guaranteed without such a mechanism in place.
2. Allow Access Via the Internet
Having an online system is the next obvious step. Accessing your tracking system from any location at all times is a necessity, not a perk. It is now an integral aspect of any project management strategy.
You or your team may be now conducting work away from the office. The system can be accessed via an online interface, allowing you to instantly enter costs. Something may get missed if you wait until you return to the office.
3. Create an index of expenses
Even if you have a system in place for keeping tabs on your projects, it won’t be useful until you know what you can afford to spend.
Expenses must be accounted for. Different projects and sectors require different lists, but documenting all of them is essential.
Estimating the cost of your project requires a detailed breakdown of its parts and the resources required to complete each one.
Costs include things like hiring employees, purchasing necessary equipment, renting or purchasing office space, paying for legal representation, and taking business trips.
All of these things need to be named and detailed so that you can keep tabs on their costs.
4. Build a financial plan for the project
Where this is headed, I think, is quite obvious. All of these things are necessary when making a budget.
To properly monitor your finances, you must first identify your constant and variable costs and expenses. All of your project costs will go under the budget you create.
A budget is not complete until it is approved, of course. This can help you set reasonable limits on your spending and keep tabs on when those outlays begin to exceed the budgeted amount for the project.
5. Find someone to keep tabs on the budget
If you don’t have someone in charge of supervising your project’s cost management, then your system, budget, and all the rest of the associated paperwork are for naught.
Someone on the team must be responsible for maintaining the budget-tracking software.
This individual will quickly become priceless. They will be the first to see if costs are rising above the allotted budgeted amount, and they can sound the alarm if that happens.
You should have a reliable person take charge of this operation.
6. Keep tabs on spending in real-time for maximum control
Last but not least, an online application is ideal for facilitating a more efficient and streamlined approach to cost management.
Unlike Excel, online project management software is always current and accurately displays your actual costs which we described earlier.
As a result, if you see an increase in cost, you will not only be able to react swiftly to it, but you will also prevent the loss of value and the subsequent breakdown of your budget.
Creating a budget, keeping tabs on costs at regular intervals, and comparing actual expenditures to the budget are all good practices for keeping track of a project’s financial status.
Spreadsheets, project management programs, and accountancy programs can all help with this.
It’s also crucial to keep track of costs spent, keep the budget under constant review, and keep everyone in the loop about the project’s financial health.
Cost overruns can be avoided and the project can be completed within budget if regular cost tracking is performed. This data can also be used to guide strategic resource allocation.