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Although cost may not always be at the forefront of an active project manager’s mind, ineffective cost management is often the very reason that projects fail. Managing cost is essential to completing a venture and should be considered an important subset of project management.

How to manage cost in project management is often about taking a calibrated approach to your portfolio and understanding the various facets of costs that can arise during a project. The following are a few tips and pieces of advice for managing project cost:

Estimate and Budget

Planning is the first step to ensuring a project manager is aligned with the project management budget. This is done by meeting with your team and compiling a realistic estimate of costs. Consider all the project phases, tasks, activities and that it contains sufficient contingency. All people, material, hardware and software should be accounted for and the estimate should be used to achieve a baseline budget.

Once the estimate has been approved and the funds have been released, the project manager will have a baseline budget to work with and use against other project management cost. The monthly budget can now be worked out by dividing the estimated project length with your baseline budget. This will give a project manager an idea of exactly what they can spend in a month to stay on track.

Establish Cost Controls

Clear cost controls should be established (including sign-off responsibilities) for every expenditure. Part of maintaining a smart project management budget is planning early on who oversees what monies. Who will be approving and signing off on timesheets? Invoices? Knowing all of this is crucial to controlling the costs of a project.

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Record Costs and Calculate Metrics

To ensure you are staying within budget, you should be making cost comparisons between your estimated baseline and the actual amount of money being spent. If the numbers are far apart, a project manager will not be meeting the budget at the end of the project unless they do something. The metrics ought to be calculated at the end of each reporting period and the total amount spent should be compared to what you were expecting to spend.

Update Forecasts

If any numbers are off, you need to update your forecasts to have a better understanding of how you will be using future funds more efficiently. You never want to let it get to the point where you are surprised about budget losses and need to ask stakeholders for more. Revisiting these numbers on a monthly basis will allow you to initiate any changes that need to take place and adjust the budget accordingly.

When asking how to manage cost in project management, it is all about planning and continuous updates. Understanding who is responsible for what costs is also helpful for a project manager to stay on task with the budget. Creating a monthly expected budget and frequently matching your forecasts to these numbers will ensure you are aligning tasks as close to the budget as possible. And when the budget is on point, then the project is generally successful.