If your team is like most, you maintain a view into how your project budget forecasts stack up against actual expenditures. You also probably monitor spend to ensure you stay within your approved budget limits.
But is that all you’re doing? If so, you’re missing out on important insights that could help you be more efficient, more effective, and more consistently successful in delivering good project results.
Project budgets are gold mines of useful insights, but it hasn’t always been easy to sift through everything to find the nuggets of information you need. Fortunately, technology advancements now make it possible to more fully leverage your project budget data and use it to your advantage.
We’ve put together a handful of elements your project budgets can help to reveal. With this information in hand, you’ll have a far better understanding of where opportunities lurk to improve your project management efforts.
It’s true that many project teams already look to their budget data to tell them if they’re overspending. However, you’ll develop a deeper awareness of your expenditures if you evaluate your actual project spend over time. Look for patterns, such as the point in each project lifecycle where you went over budget. If too much money is going out the door early, consider why that’s happening. Is your budget consumption out of sync with funding availability? Are cost-saving efforts overlooked when the project is new and still flush with cash? Scrambling at the end of the project to trim spend may mean you need to shift your team’s mindset so everyone is consistently prudent about expenditures from the beginning.
Not to be confused with underspending, the problem of overbudgeting may not seem like much of a problem at all—when is having money left over a bad thing?—but if it happens regularly it might indicate a need to improve your team’s budget development practices. Perhaps you’re budgeting high because stakeholders won’t allot time for you to gather realistic estimates from vendors. Or you’re worried that sponsors of other projects will help themselves to your budget if they run low, so you stuff some “just in case” money inside various line items. Both scenarios signal a need for new processes. Rather than erode executives’ confidence in your ability to develop accurate budgets, you should implement a strategy that maintains sound estimation practices and protects your funding with strong stakeholder buy-in and leadership commitment.
Inadequate risk management skills sometimes reveal themselves in a close review of budget figures. Fixing problems at the last minute typically involves throwing more money at the issue than would have been spent if you’d mitigated risks properly at the start of the project, for example. Funds directed at resolving these sorts of risk-related challenges will show up in the project’s actuals, so take the time to look for links that may indicate your risk management needs some work. Even if costs aren’t significant at the per-project level, you may find they add up to a sizeable amount across the portfolio and over time.
Teams can get a better view of inefficient resource allocation issues by assessing where, when, and how their project funds are spent. Depending on the nature of the project and the way work needs to be done, things like multiple charges for onsite visits from the same vendor could be a flag. Funds spent on off-hours labor might also indicate your practices need a rethink. Late or overage charges for equipment rentals, rush fees to secure supplies, and restocking fees to return unused materials could all point to inefficient management of your project’s resources.