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4 Components Of Successful Cost Management

Almost everyone would agree that managing costs on projects is important, but not all businesses are effective at it.

An article on The Project Management Hut spells out the value of cost management like this: “By knowing the true cost of project work, you can make decisions on the value of taking on certain work, and you can ensure that the work you have decided to take on is not costing more than it’s worth.”

The article goes on to outline the four key components:

  • Estimate: For field services companies, project and work order software needs to be able to break down cost by job role or service performed. If there are substantial wage differences between employees, or electrical work costs more or less per hour than mechanical work, then they need to be separate lines in the service budget.
  • Track: Everyone on the project must be responsible for tracking costs as they’re incurred.When the company is tracking the individual labor transactions, they need to be allocated to the right cost item, based on how they were estimated. This means that if earned profit is materially affected, the company can move into controlling costs while it has the opportunity to do something about it. Again, having the ability to break down costs where there is variance is critical.
  • Control: Don’t forget labor cost. Managing individual time allotments for tasks often requires coaching, as noted in The Project Management Hut article.
  • Maintain: Use this cost data for estimation and planning during future projects.

Source: The Project Management Hut, October 2012

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